Questions: question 13 of 16 Suppose that Paulie and Vinny can each produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vinny can produce in 1 hour, respectively, if they devote all of their time and effort into making the good. Round all answers to two decimal places. - Ice cream (cups) T-shirts (quantity) - Paulie: 2.00 17.00 - Vinny: 9.00 13.00 a. What is Paulie's opportunity cost of producing a cup of ice cream? Paulie's opportunity cost: t-shirts b. What is Vinny's opportunity cost of producing a t-shirt? Vinny's opportunity cost: cups of ice cream c. Paulie has a comparative advantage in and Vinny has a comparative advantage in

question 13 of 16

Suppose that Paulie and Vinny can each produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vinny can produce in 1 hour, respectively, if they devote all of their time and effort into making the good. Round all answers to two decimal places.

- Ice cream (cups) T-shirts (quantity)
- Paulie: 2.00 17.00
- Vinny: 9.00 13.00

a. What is Paulie's opportunity cost of producing a cup of ice cream?

Paulie's opportunity cost: t-shirts

b. What is Vinny's opportunity cost of producing a t-shirt?

Vinny's opportunity cost: cups of ice cream

c. Paulie has a comparative advantage in and Vinny has a comparative advantage in

Transcript text: question 13 of 16 Suppose that Paulie and Vinny can each produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vinny can produce in 1 hour, respectively, if they devote all of their time and effort into making the good. Round all answers to two decimal places. \begin{tabular}{|l|c|c|} \hline & Ice cream (cups) & T-shirts (quantity) \\ \hline Paulie & 2.00 & 17.00 \\ \hline Vinny & 9.00 & 13.00 \\ \hline \end{tabular} a. What is Paulie's opportunity cost of producing a cup of ice cream? Paulie's opportunity cost: $\square$ t-shirts b. What is Vinny's opportunity cost of producing a t-shirt? Vinny's opportunity cost: $\square$ cups of ice cream c. Paulie has a comparative advantage in $\square$ and Vinny has a comparative advantage in $\square$

Solution

To solve these questions, we need to calculate the opportunity costs for both Paulie and Vinny and determine their comparative advantages.

a. Paulie's opportunity cost of producing a cup of ice cream:

Paulie can produce 2 cups of ice cream or 17 t-shirts in one hour. The opportunity cost of producing one cup of ice cream is the number of t-shirts Paulie forgoes to produce that cup.

Opportunity cost of 1 cup of ice cream = (T-shirts given up) / (Ice cream produced)
= 17 t-shirts / 2 cups of ice cream
= 8.50 t-shirts per cup of ice cream

Paulie's opportunity cost: 8.50 t-shirts

b. Vinny's opportunity cost of producing a t-shirt:

Vinny can produce 9 cups of ice cream or 13 t-shirts in one hour. The opportunity cost of producing one t-shirt is the number of cups of ice cream Vinny forgoes to produce that t-shirt.

Opportunity cost of 1 t-shirt = (Ice cream given up) / (T-shirts produced)
= 9 cups of ice cream / 13 t-shirts
= 0.69 cups of ice cream per t-shirt

Vinny's opportunity cost: 0.69 cups of ice cream

c. Comparative advantage:

Comparative advantage is determined by who has the lower opportunity cost for producing a good.

Paulie's opportunity cost for ice cream is 8.50 t-shirts, while Vinny's opportunity cost for ice cream is 1.44 t-shirts (13 t-shirts / 9 cups of ice cream). Vinny has a lower opportunity cost for ice cream.
Paulie's opportunity cost for t-shirts is 0.12 cups of ice cream (2 cups of ice cream / 17 t-shirts), while Vinny's opportunity cost for t-shirts is 0.69 cups of ice cream. Paulie has a lower opportunity cost for t-shirts.

Paulie has a comparative advantage in t-shirts and Vinny has a comparative advantage in ice cream.

Was this solution helpful?