Last Updated 31 Jul 2021

Notes on Economics

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The following table shows output per hour for Martha and Stewart who make gift baskets and potholders:

  • (a) What is the opportunity cost of a gift basket for Martha? What is the opportunity cost of a gift basket for Stewart? Who has a comparative advantage in producing gift baskets? How can you tell?
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  • (b) What is the opportunity cost of a potholder for Martha?

What is the opportunity cost of a potholder for Stewart? Who has an absolute advantage in producing potholders? Who has a comparative advantage in producing potholders? Notes on Economics By optometrist Both produce fruit and timber.

Each island has a labor force of 1,200. The table below gives production per month for each worker in the country:

  • (a) Which country has an absolute advantage in the production of fruit? Which country has an absolute advantage in the production of timber?
  • (b) Which country has a comparative advantage in the production of fruit? Of timber?
  • (c) Sketch the production possibility frontiers for both countries.
  • (d) If both countries desired to have equal numbers of feet of timber and baskets of fruit, how would they allocate worker to the two sectors?
  • (e) Show that specialization and trade can move both countries beyond their produce-

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