1. It takes farmer 20 hours to = 1 lb. meat
1. Explain why the farmer’s opportunity cost of producing 1lb of meat is 2lb of potatoes.
It takes farmer 20 hours to = 1 lb. meat
It takes farmer 10 hours to = 1lb. Potatoes
In the same 20 hours- he could have produced 2 lb. of potatoes.
…so in making 1 lb. meat , he has given up the opportunity to make 2lb. potatoes

2. It takes rancher 1 hr to = 1lb meat
2. Explain why the rancher’s opportunity cost of producing 1lb of meat is 1/8 lb of potatoes.
It takes rancher 1 hr to = 1lb meat
It takes rancher 8 hrs to = 1lb. Potatoes
In the 1 hr he used to make meat, he could have produced 1/8 lb potatoes
…so in making 1lb meat, he has given up the opportunity to make 1/8 lb potatoes

3. She can read 100 pg. soc. in 2 hours
3. Maria can read 20 pg. of econ in 1hr. or she can read 50 pg. of sociology in 1hr. She spends 5 hrs. per day studying.
A. draw Maria’s PPF
B. what is her opportunity cost of reading 100 pages of sociology?
She can read 100 pg. soc. in 2 hours
In the same 2 hours she could have read 40 pg. econ
100 econ
250 soc.

4. 1 American worker can produce 4 cars / year
4. Given the following information about US and Japanese labor and production:
1 American worker can produce 4 cars / year
1 Japanese worker can produce 4 cars / year
1 American worker can produce 10 tons grain / year
1 Japanese worker can produce 5 tons grain /year
There are 100 million workers in each country

5. a. construct a table similar to table 3-1 in your text
1 workers production cars /yr tons/grain/yr US 4 10 Japan 4 5

6. b. graph PPF for US and Japanese economies
b. graph PPF for US and Japanese economies *remember – they have 100 million workers
400 US
Cars/millions
Japan
Tons grain/ millions

7. c. For the US, what is the opportunity cost of 1 car (show your work)
OC of 1 car = 10 tons
4 cars
d. For the US, what is the opportunity cost of 1 ton of grain (show your work)
OC of 1 ton = cars
10 tons
= 2.5 tons grain x 100 mill workers
= 0.4 cars x 100 mill workers

8. e. For Japan, what is the opportunity cost of 1 car (show your work)
OC 1 car = 5 tons 4 cars f. For Japan, what is the opportunity cost of 1 ton of grain (show your work) OC 1 ton = 4 cars 5 tons
= 1.25 tons x 100 mill. workers
= 0.8 cars x 100 mill. workers

9. Absolute advantage for cars = No one – each input produces same output
g. Which country has the absolute advantage for cars? …..grain? Explain w/ #
Absolute advantage for cars =
No one – each input produces same output
Absolute advantage for grain=
US – each(same) input produces more output

10. Japan – have lower o.c. of producing cars
h. Which country has the comparative advantage for cars? …..grain? Explain w/ #
Comp. adv cars =
Japan – have lower o.c. of producing cars
Japans oc of 1 car = 1.5 tons vs. US oc of 1 car = 2.5 tons
Comp adv grain =
US – have lower oc of producing grain
US oc of 1 ton grain = .4 cars vs Japans oc of 1 ton grain = .8 cars

11. US 50 mil x 4 cars = 200 mil cars 50 mil x 10 tons = 500 mil tons
i. Without trade: ½ of each countries workers produce cars and ½ produce grain. Calculate how many cars and tons of grain are produced by each country. US
50 mil x 4 cars = 200 mil cars
50 mil x 10 tons = 500 mil tons
Japan
50 mil x 5 tons = 250 mil tons
Totals
400 mil cars and 750 mil tons

12. ….so let’s specialize and trade
US produces only grain = 1 billion tons
Japan produces only cars = 400 million cars
Total world production has increased
Was 400 m cars and 750 m tons
Trade :
US gives up 300 million tons for 200 million cars
Compare to letter ( i )

13. US No trade: 200 m cars 500 m tons Trade: 200 m cars 700 m tons Japan No trade: 200 m cars 250 m tons Trade: 200 m cars 300 m tons