and Marissa\'s are farmers, Each one owns a 4 acre plot of land. The table below

Question

and Marissa's are farmers, Each one owns a 4 acre plot of land. The table below shows the amount of and each farmer can produce on a given acre. Both farmers can choose whether to all 4 acres to producing corn, all 4acres to producing ,or produce corn on some of their land on the rest. On the graph below, use the red line (plus symbols) to plot production possibilities (PPF), and use the blue line (circle symbols) to plot Marissa's PPF. Has absolute advantage in the production of corn, and has an absolute advantage in the production of . opportunity cost one of is . whereas Marissa's opportunity cost of producing one of is . Because has a opportunity cost of producing than Marissa. has a comparative advantage in the production of , and has a comparative advantage in the production of corn.

Explanation / Answer

Marissa has an absolute advantage in the production of corn, and Marissa has an absolute advantage in the production of alfalfa. This is because Marissa can produce more corn/acre (12>4) and more alfalfa/acre (3>2) than Ralph. Ralph's opportunity cost of producing one bushel of alfalfa is 2 corn, whereas Marissa's opportunity cost of producing one bushel of alfalfa is 4 corn. Find opportunity costs for each person by comparing production: Ralph can produce 2 alfalfa or 4 corn, or 2 alfalfa:4 corn. So, 2 alfalfa COST Ralph 4 corn, or divide by two to see how much 1 alfalfa costs. 1:2, so one alfalfa cost Ralph two corn, so two corn is his opportunity cost. Marissa's opportunity cost is 3 A:12 C, reduce by dividing by 3, to find that Marissa's cost of one alfalfa is 4 corn. Because Ralph has a LOWER opportunity cost of producing alfalfa than Marissa, RALPH has a comparative advantage in the production of alfalfa, and MARISSA has a comparative advantage in the production of corn. Whoever has the lowest opportunity cost has the comparative advantage because it costs less for them to produce it. Since 1 alfalfa costs Marissa 4 corn and only costs Ralph 2 corn, Ralph has the comparative advantage in corn. Corn "costs" Ralph 1/2 of an alfalfa, and "costs" Marissa 1/4 (3/12) of an alfalfa, so Marissa can "make" corn cheaper, so she has the comparative advantage in corn. Let me know if you need any further explanation.

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