1. The following table shows output per hour for Fred and Barney who mow lawns and trim hedges:
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Output per Hour
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Fred
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Barney
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Lawns Mowed
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2
|
1
|
|
Hedges Trimmed
|
8
|
6
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What is the opportunity cost of mowing a lawn for Fred? What is the opportunity cost of trimming a hedge for Fred? Who has a comparative advantage in mowing lawns? How can you tell?
2. The following table shows output per hour for Mexico and Canada, two countries that produce beer and T-shirts:
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Output per Hour
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Mexico
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Canada
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Beer (thousands of bottles)
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5
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10
|
|
T-shirts (thousands)
|
10
|
12
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What is the opportunity cost of a bottle of beer for Mexico? What is the opportunity cost of a T-shirt for Mexico? Who has a comparative advantage in producing beer? How can you tell?
3. Suppose that Rosie and Betty spend their free time making cakes and cookies. Is it possible for Betty to have an absolute advantage in the production of both cakes and cookies? Is it possible for Betty to have a comparative advantage in the production of both cakes and cookies? Explain.
4. Papa Ray owns a pizzeria. He is more efficient at making pizza than anyone he could hire. Does this mean that he should make all of the pizzas himself?