Econ 201-1 Homework 1 Due: 9/5 (Wednesday) Part 1. Assume that a farmer and a ra

Question

Econ 201-1 Homework 1 Due: 9/5 (Wednesday) Part 1. Assume that a farmer and a rancher can switch between producing meat and producing potatoes at a constant rate. Pounds Produced in 40 Hours Potatoes 20 Meat Farmer Rancher 10 1. Who has an absolute advantage in producing meat? Why? 2. Who has an absolute advantage in producing potatoes? Why? The opportunity cost of 1 pound of meat for the farmer is A)I/5 pound of potatoes. B)1/5 hour of labor. C)5 pounds of potatoes. D) 1 0 hours of labor. 3. 4. The opportunity cost of 1 pound of meat for the rancher is A)1/2 pound of potatoes. B)2 hours of labor C)2 pounds of potatoes. D)4 hours of labor. 5. Who has a comparative advantage in producing meat? The opportunity cost of I pound of potatoes for the farmer is A)I/5 pound of meat. B)2 hours of labor C)5 pounds of meat D)5 hours of labor. 6. The opportunity cost of 1 pound of potatoes for the rancher is A)1/2 pound of meat. B ) i /2 hour of labor. C)2 pounds of meat. D)8 hours of labor. 7.

Explanation / Answer

1..)

Rancher has an absolute advantage in producing meat.

Rancher: 10

Farmer: 4

2)

Farmer has an absolute advantage in producing potatoes.

Farmer: 20

Rancher: 5

3)

Opportunity cost of producing Meat = 20/4

                                                                 = 5

Right answer is : (C )

4)

Opportunity cost of producing 1 pound of meat for rancher is : 5/10

    = ½

Right answer is : (A)

5)

Rancher has comparative advantage in producing meat.

6)

Opportunity cost of producing 1 pound of potatoes for the farmers is : 4/20

= 1/5

Right answer is : (a)

7)

Opportunity cost of producing potatoes for rancher; 10/5

= 2

Right answer is (C)

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