Question

specialization. Imagine a household with two spouses: Jaelyn and Tanner. They each can produce either home goods or market goods. Jaelyn can produce either $10 of home goods or $15 of markets goods in an hour, while Tanner can produce $12 of home goods or $12 of market goods in an hour.

1. Which of the following statements about opportunity cost is true?
a. Jaelyn has a higher opportunity cost for market goods than Tanner, with each dollar of market good
production costing 1.5 dollars of home goods.
b. Jaelyn has a lower opportunity cost for market goods than Tanner, with each dollar of market good
production costing 1.5 dollars of home goods.

c. Jaelyn has a higher opportunity cost for market goods than Tanner, with each dollar of market good
production costing 0.67 dollars of home goods.
d. Jaelyn has a lower opportunity cost for market goods than Tanner, with each dollar of market good
production costing 0.67 dollars of home goods.

2. We need to draw the per capita production possibilities frontier in one hour. Which of the following represents this?

Answer 1

Jaelyn can produce either $10 of home goods or $15 of market goods in an hour, while Tanner can produce $12 of home goods or $12 of market goods in an hour.

OC of producing market goods for

Jaelyn = 10/15 = 0.67

Tanner = 12/12 = 1

So, Jaelyn has a comparative advantage in producing Market goods as OC is lower

OC of producing Home Goods for

Jaelyn = 15/10 = 1.5

Tanner = 12/12 = 1

so, Tanner has the comparative advantage in producing Home goods as OC is lower

The following are correct-
d. Jaelyn has a lower opportunity cost for market goods than Tanner, with each dollar of market good
production costing 0.67 dollars of home goods.