2. Hatfields

3. 8 hours per bushel

4. 10 hours per yard

5. McCoys

6. 15 hours per bushel

7. 12 hours per yard

8. To produce corn and cloth, the Hatfields must spend: 8 hours for 1 bushel of corn 10 hours for 1 yard of cloth For a total of 18 production hours for 1 bushel of corn and 1 yard of cloth

9. To produce corn and cloth, the McCoys must spend: 15 hours for 1 bushel of corn (compared to 8 for Hatfields) 12 hours for 1 yard of cloth (compared to 12 for Hatfields) To a total of 27 hours total production for 1 bushel of corn and 1 yard of cloth

10. If the Hatfields produce only corn and trade 1 bushel of corn for 1 yard of cloth, they would spend: 16 hours for 2 bushels of corn (8 x 2) 16 hours for 1 bushel of corn and 1 yard of cloth

11. If the McCoys produce only cloth and trade 1 yard of cloth for 1 bushel of corn, they would spend: 24 hours for 2 yards of cloth (12 x 2) 24 hours to have 1 yard of cloth and 1 bushel of corn through trade

12. If the Hatfields and McCoys specialize in the lowest cost production, how much time would each family gain? Hatfields gain 2 hours (Total production before was 18, now its only 16) McCoys gain 3 hours (Total production before was 27, now its only 24)

13. Absolute Advantage The ability of an individual or group to carry out a particular economic activity more efficiently than any other individual or group

14. Opportunity Cost The highest-valued alternative that must be sacrificed when an action is selected. It is what the decision maker could have had instead. Opportunity cost is not the same thing as money price.

15. Comparative Advantage Having the lowest “opportunity cost” of production

16. Comparative Advantage - Corn How much does it cost (opportunity cost) a Hatfield to produce 1 bushel of corn? 4/5 yard of cloth 8 hours of corn production/10 hours of cloth production How much does it cost (opportunity cost) a Hatfield to produce 1 bushel of corn? 1 ¼ yards of cloth 15 hours of corn production/12 hours of cloth production

17. Comparative Advantage - Cloth How much does it cost (opportunity cost) a Hatfield to produce 1 yard of cloth? 1 ¼ bushels of corn 10 hours of cloth production/8 hours of corn production How much does it cost (opportunity cost) a Hatfield to produce 1 yard of cloth? 4/5 bushels of corn 12 hours of cloth production/15 hours of corn production

18. Trade-off In achieving certain economic goals, we may have to sacrifice others. For example, when solving unemployment, we may cause inflation. When raising taxes to redistribute money to the poor, we may depress the incentive to work When specializing and trading, the Hatfields and McCoys had to “trade- off” self-sufficiency and security for leisure time and more material possessions.