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Weighing Opportunity Costs

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CONCEPTS OF MICROECONOMICS

Weighing Opportunity Costs

In our first week of Microeconomics we are looking closely at a specific scenario. We will use what we read and what we learned the first week, about the basics of Microeconomics. We will look closely at opportunity costs and at comparative advantages. The scenario this week is as follows. Two people, Michelle and James live alone in an isolated region. They each have the same resources available and they grow potatoes and raise chickens. If Michelle decides to use all her resources growing potatoes, she can grow about 200 pounds a year. If she devotes all her resources to raising chickens, she can raise 50 a year. If James devotes all his resources to growing potatoes, he can grow 80 pounds a year. If he devotes all his resources to raising chickens, he can raise 40 a year. Now we will answer a few specific questions about the scenario. What is Michelle’s opportunity of producing potatoes? The opportunity cost of producing potatoes, if all resources are used, is not raising any chickens. If Michelle used all resources to grow the potatoes, no resources would be left to raise chickens.
What is Michelle’s opportunity cost of raising chickens? If Michelle decides to use all resources to raise chickens, her opportunity cost would be growing potatoes. If she uses all resources to raise chickens, nothing would be left over to grow potatoes. What is James’ opportunity cost of producing potatoes? His opportunity cost of producing potatoes would be not being able to raise any chickens. What is James’ opportunity cost of raising chickens? If James uses all his resources to raise chickens he would be forgoing producing any potatoes. CONCEPTS OF MICROECONOMICS
Which person has an absolute advantage in which activity? Absolute advantage can be defined as

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