OPPORTUNITY COST

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School

Southern New Hampshire University *

*We aren’t endorsed by this school

Course

ECO202T140

Subject

Economics

Date

Apr 3, 2024

Type

png

Pages

Uploaded by ChefBookWombat42

3. Opportunity Cost Hilary and Maria are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Hilary takes 5 hours to brew a gallon of root beer and 3 hours to make a pizza. Maria takes 8 hours to brew a gallon of root beer and 4 hours to make a pizza. Hilary's opportunity cost of brewing a gallon of root beeris 3/5 pizza X , and Maria's opportunity cost of brewing a gallon of root beer is 1/2pizza X. Points: 0/1 Explanation: Close Explanation A The opportunity cost of an item is what you give up to get that item. In this case, Hilary's opportunity cost of brewing a gallon of root beer is the number of pizzas she gives up making. Brewing a gallon of root beer takes her 5 hours; if instead she spent her time producing pizza, she would produce 5 hours x ;::; = 1 2/ 38 pizzas. Similar calculations yield an opportunity cost of 2 pizzas for one gallon of root beer for Maria. See Section: Opportunity Cost and Comparative Advantage. Hilary ¥ has an absolute advantage in brewing root beer, and Hilary ¥ has a comparative advantage in brewing root beer. Points: mm 1/ 1 If Hilary and Maria trade foods with each other, Hilary X will trade pizza in exchange for root beer. Points: 0/1

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