Eric and Ginny are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of alfalfa and barley each farmer can produceper year on a given acre. Each farmer chooses whether to devote all acres to producing alfalfa or barley or to produce alfalfa on some of the land andbarley on the rest.AlfalfaBarley(Bushels per acre)(Bushels per acre)Eric204Ginny28On the following graph, use the blue line (circle symbol) to plot Eric's production possibilities frontier (PPF), and use the purple line (diamond symbol)to plot Ginny's PPF.200180Eric's PPF160140120Ginny's PPF100806040BARLEY (Bushels) 200180Eric's PPF160140120Ginny's PPF1008060401002003004005006007008009001000ALFALFA (Bushels)has an absolute advantage in the production of barley.has an absolute advantage in the production of alfalfa, andEric's opportunity cost of producing 1 bushel of barley isbushels of alfalfa, whereas Ginny's opportunity cost of producing 1 bushel ofbarley isbushels of alfalfa. Because Eric has aopportunity cost of producing barley than Ginny,has a comparativeadvantage in the production of barley, andhas a comparative advantage in the production of alfalfa.BARLEY (Bushels)20

Production possibility frontier shows the combination of two goods that can be produced with the…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Opportunity Cost

Ana and Dina are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Ana takes 3 hours to brew a gallon of root beer and 2 hours to make a pizza. Dina takes 7 hours to brew a gallon of root beer and 5 hours to make a pizza.

Ana's opportunity cost of brewing a gallon of root beer is , and Dina's opportunity cost of brewing a gallon of root beer is .

has an absolute advantage in brewing root beer, and has a comparative advantage in brewing root beer.

If Ana and Dina trade foods with each other, will trade away pizza in exchange for root beer.

The price of pizza can be expressed in terms of gallons of root beer. The highest price at which pizza can be traded that would make both roommates better off is of root beer, and the lowest price that makes both roommates better off is of root beer per pizza.

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