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Author Question: Consider two individuals, Ozzy and Sharon, who produce toy boats and yoyos. Ozzy's and Sharon's ... (Read 112 times)

Marty

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on: Jun 30, 2018
Consider two individuals, Ozzy and Sharon, who produce toy boats and yoyos. Ozzy's and Sharon's hourly productivity are as follows:
 
  Yoyos /hour Toy boats /hour
  Ozzy 12 4
  Sharon 10 5
 
  Who has the absolute advantage or comparative advantage in the production of yoyos or boats?

Question 2

One example of a microeconomic question is, How will prices in the clothing industry change if the government bans imports from China?
 
  Indicate whether the statement is true or false
Macroeconomics: Principles, Applications and Tools ¦ O'Sullivan, Sheffrin, Perez ¦ 7th Edition
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matt95

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Reply #1 on: Jun 30, 2018
Answer to Question 1

Sharon has the absolute advantage in boats and Ozzy has the absolute advantage in yoyos. Sharon also has the comparative advantage in boats while Ozzy has it in yoyos, because Sharon's opportunity cost of producing one boat per hour is 2 yoyos, and Ozzy's opportunity cost of producing one boat per hour is 3 yoyos.

Answer to Question 2

TRUE


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