# Production and Perfect Competition

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Unit 1 IP
Heather Williams | Potatoes | Chickens | Michelle | 200 / 4 | 50 / 1 | James | 80 / 2 | 40 / 1 |

1. What is Michelle’s opportunity cost of producing potatoes?
Michelle’s opportunity cost of producing potatoes is 1 pound of potatoes is equivalent to ¼ of a chicken. The opportunity cost would be ¼ of a chicken.
2. What is Michelle’s opportunity cost of producing chickens?
Michelle’s opportunity cost of producing chickens is 1 chicken is equivalent to 4 pounds of potatoes. The opportunity cost is 4 pounds of potatoes.
3. What is James’ opportunity cost of producing potatoes?
James’ opportunity cost of producing potatoes is 1 pound of potatoes is equivalent to ½ of a chicken. The opportunity cost is ½ of a chicken.
4. What is James’ opportunity cost of producing chickens?
James’ opportunity cost of producing chickens is 1 chicken is equivalent to 2 pounds of potatoes. The opportunity cost is 2 pounds of potatoes.
5. Which person has the absolute advantage in which activities?
Michelle has the absolute advantage in both activities because she can produce more potatoes and more chickens then James.
6. Which person has the comparative advantage in potatoes?
Michelle has the comparative advantage of potatoes 200/50 = 4 pounds of potatoes per 1 chicken, where James is 80/40 = 2 pounds of potatoes per 1 chicken.
7. Which person has the comparative advantage in chicken?
James has the comparative advantage in chicken 40/80 = .50 or ½ chicken per 1 pound of potatoes, where Michelle is 50/200 = .25 or ¼ chicken per 1 pound of potatoes.

8. Suppose that they are thinking of each specializing completely in the area in which they have a comparative advantage, and then trading at a rate of 2.5 pounds of potatoes for 1 chicken, would they each be better off? Explain
If 2.5 pounds of potatoes is equivalent to 1 chicken then Michelle would be

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