Answer to Question 1
Sue forgoes 4 jackets to produce 40 caps, so Sue's opportunity cost of producing one cap is (4 jackets) (40 caps) or 0.1 jackets per cap. Tessa forgoes 4 jackets to produce 80 caps, so Tessa's opportunity cost of produc-ing one cap is (4 jackets) (80 caps) or 0.05 jackets per cap. Tessa's opportunity cost of a cap is lower than Sue's opportunity cost, so Tessa has a comparative advantage in producing caps.
If Tessa specializes in caps and Sue specializes in jackets, both Sue and Tessa gain from trade. For instance, suppose they settle upon a price of 1 jacket for 15 caps. Sue gains because she can obtain caps from Tessa at a cost of (1 jacket) (15 caps), which is 0.067 jacket per cap, a cost that is lower than what it would cost her to produce caps herself. Tessa also gains from trade because she trades caps for jackets for 0.067 jacket per cap, which is higher than her cost of producing a cap.
Answer to Question 2
Scarcity reflects the inability to satisfy all our wants. Regardless of the amount of economic growth, scarcity will remain present because it will never be possible to satisfy all our wants. For instance it will never be possible to satisfy all the wants of the several thousand people who all would like to ski the best slopes on Vail with only their family and a few best friends present. So economic growth allows more wants to be satisfied but it does not eliminate scarcity.
On May 15, 1916, after deliberating for one hour, an all-white jury in Waco, Texas, found seventeen-
Examples of the most common X-ray positions and the images they produce.
The primary response causes B cells to produce memory B cells and a few antibodies. The second ...
Polar ice caps lose mass as surface ice melts
Nitrogen dioxide decomposes at 300°C via a second-order process to produce nitrogen monoxide ...
A common autosomal recessive allele can produce a pedigree that looks like an autosomal dominant tra