Question

You are getting ready to open The Shoe Hut, but you need to need to determine whether you have the absolute or comparative advantage in the production of specific items. This will help you determine which product is the best for specialization.

Your production possibilities are as follows:

·      You have the resources to produce up to 15 running shoe inserts.

·      You have the resources to produce up to 10 hiking boot inserts.

·      For every 2 hiking boot inserts produced, you give up the production of 3 running shoe inserts.

Your production possibilities schedule will help you determine:

your opportunity costs.

your best options for production.

Scroll to the next page to complete your production possibilities schedule.

1.    Using the information that you learned about your ability to produce running shoe inserts and hiking boot inserts, complete your Using the information that you learned about your ability to produce running shoe inserts and hiking boot inserts, complete your production possibilities schedule. (5 points)   

Combinations	Running shoe inserts	Hiking boot inserts
A
B
C
D
E
F

Answer 1

Combinations	Running Shoe Inserts	Hiking Boot Inserts
A	0	10
B	3	9
C	3	8
D	6	7
E	6	6
F	9	5
G	9	4
H	12	3
I	12	2
J	15	1

Above are the various combinations of production. The logic to arrive at this table is as follows

For combination A, start with full production of Hiking Boot Inserts, i.e. of 10. Now for every 2 boot inserts, you cannot produce 3 running shoe inserts. Which means (10/2) x 3 is the number of shoes that cannot be manufactured. In this case it is 15. Since the max running shoe insert that you can manufacture is 15, hence number of running shoes in combination A = 15-15 = 0

Similarly for combination B, reduce boot insert by 1, i.e. 9. Number of running shoes inserts that cannot be manufactured is (9/2) = 4 (we are going to take the whole number only since we cannot make 4.5 inserts) and multiply it by 3. In this case, it becomes 12. Hence number of running shoe inserts that can be manufactured is 15-12 = 3

Combination C, reduce boot insert by 1, i.e. 8. Divide 8 by 2 and multiply it by 3 = 12. Hence number of running shoe inserts is 15-12 = 3

Combination D, reduce boot insert by 1, i.e. 7. Divide 7 by 2 and multiply 3 (again, we are not taking decimal of 3.5) by 3 = 9. Hence number of running shoe inserts is 15-9=6

By following the same logic as above, the remaining combinations can be arrived at.