The figure above shows Prakash's and Gail's production possibilities frontiers for writing books and magazine articles
a. What is Prakash's opportunity cost of a book? What is Gail's opportunity cost? Who has the comparative advantage in writing books?
b. Who has the comparative advantage in writing magazine articles?
c. According to their comparative advantages, who should write books and who should write magazine articles?
a. In a year, Prakash can write 2 books or 40 magazine articles. Hence the opportunity cost of 1 book is (40 magazine articles) ÷ (2 books) = 20 magazine articles per book. In a year, Gail can write 3 books or 30 magazine articles. Hence the opportunity cost of 1 book is (30 magazine articles) ÷ (3 books) = 10 magazine articles per book. Gail's opportunity cost of writing books is lower than Prakash's, so Gail has the comparative advantage in writing books.
b. Prakash has the comparative advantage in writing magazine articles.
c. Gail has the comparative advantage in writing books, so she should write books. Prakash has the comparative advantage in writing magazine articles, so he should write magazine articles.
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Who popularized the expression "Time is money."
a. Benjamin Franklin b. George Washington c. Herbert J. Jones d. Amanda Cunningham
After the American Civil War, many prominent Southerners lamented the fact that the South "overproduced" cotton and "underproduced" food. In fact, the South did import a very large percentage of its food. Nevertheless, rather than reduce cotton production and grow more food, Southern farmers did the opposite because
a. they were irrational and distraught over the loss of slavery. b. the South had a comparative advantage in cotton production. c. the North had a comparative advantage in cotton production. d. corn was absolutely cheaper to produce in the North.