# Michelle's opportunity cost of potatoes

Suppose that two people, Michelle and James each live alone in an isolated region. They each have the same resources available, and they grow potatoes and raise chickens. If Michelle devotes all her resources to growing potatoes, she can raise 200 pounds of potatoes per year. If she devotes all her resources to raising chickens, she can raise 50 chickens per year. (If she apportions some resources to each, then she can produce any linear combination of chickens and potatoes that lies between those extreme points. If James devotes all his resources to growing potatoes, he can raise 80 pounds of potatoes per year. If he devotes all his resources to raising chickens, he can raise 40 chickens per year. (If he apportions some resources to each, then he can produce any linear combination of chickens and potatoes that lies between those extreme points.)

Michelle= Potatoes 200 pounds and Chicken 50

James = Potatoes 80 and Chickens 40

What is Michelle's opportunity cost of producing potatoes?

What is Michelle's opportunity cost of producing chickens?

What is James' opportunity cost of producing potatoes?

What is James' opportunity cost of producing chickens?

Which person has an absolute advantage in which activities?

Which person has comparative advantage in potatoes?

Which person has comparative advantage in chicken?

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.

How would you extend the above narrative to businesses, society as a whole or nations? Explain.

https://brainmass.com/economics/comparative-advantage/406610

#### Solution Preview

Michelle's opportunity cost of potatoes is how many chickens she would have to give up to produce a pound of potatoes. Since she can produce 50 chickens to 200 potatoes, her opportunity cost is 50/200 or 1/4 chicken per pound of pound of potatoes. Her opportunity cost of producing chickens is the reciprocal of her opportunity cost of producing potatoes or 4 potatoes per chicken.

James opportunity costs are 2 potatoes per chicken and 1/2 chicken per potato.

Michelle has the absolute advantage in producing both chickens and ...

#### Solution Summary

Michelle's opportunity cost of potatoes is articulated from this case.