Suppose that Paulie and Vinny each can produce ice cream or

Suppose that Paulie and Vinny each can produce ice cream or t-shirts. The table below shows the quantity of each good that Paulie and Vinny each can produce in one hour, respectively, if they devote all of their time and effort into making the good.

Solution

According this table-

a)1 cup of ice cream\'opportunity cost is=

5 cup of ice cream=19 T.shirts

1 cup of ice cream = 19/5= 3.8 T.Shirts ( 4 T.Shirts)

b) 1 t.shirt\'s opportunity cost is=

12 T.shirts = 10 Ice cream

1 T.shirt= 10/12= .83( 1 Ice cream)

c)Paulie has a comparative advantage in T.shirt and Vinny has comparative advantage in Ice cream.