Intro To Macroeconomics Worksheet With Answer Key (Page 4 of 4) in pdf

Intro To Macroeconomics Worksheet With Answer Key Page 4

Figure

It takes Maria two hours to read 100 pages of sociology. In that time, she could read 40

pages of economics. So the opportunity cost of 100 pages of sociology is 40 pages of

economics.

13.

p. 58, Problems and Applications, Q4 (omit part c, only complete a & b)

How long does it take for Pat to cook one pizza? 2 HRS. In 2HRS, how much root beer

can Pat brew? Since Pat can brew root beer at 4 gallons/HR, only ½ a gallon will be

brewed. Thus, Pat’s opportunity cost is ½. Pat has an absolute advantage in making

pizza since she can make one in two hours, while it takes Kris four hours (Also has

absolute advantage in beer, too). Kris' opportunity cost of making a pizza is 2/3 gallons

of root beer, since she could brew 2/3 of a gallon in the time (4 hours) it takes her to make

a pizza. Since Pat's opportunity cost of making pizza is less than Kris's, Pat has a

comparative advantage in making pizza.

Since Pat has a comparative advantage in making pizza, she will make pizza and

exchange it for root beer that Kris makes.

Intro To Macroeconomics Worksheet With Answer Key Page 4