Chapter 2, Problem 6P

To determine

You are in charge of allocating residents to your dormitory’s baseball and basketball teams. You are down to the last four people, two of whom must be allocated to baseball and two to basketball. The accompanying table gives each person’s batting average and free-throw average.

(a)

Find out each player’s opportunity cost and the comparative advantage.

(b)

Why is it likely that the other basketball players will be unhappy about these arrangements but the other baseball players will be satisfied? Why would an economist say that this is an efficient way to allocate players for your dormitory’s sports teams?

Concept Introduction:

Opportunity Cost:

It is the cost of next best alternative activity. For example: A farmer can produce wheat, rice and corn in his field and earns a profit of $100, $200 and $300 per month respectively. Then farmer will choose to grow corn in his field because he will get maximum profit by growing corn. So, the opportunity cost of growing corn will be $200 because the best alternative activity is growing rice because it will give him $200 per month.

Comparative Advantage:

When one country produces the good at lower opportunity cost than the other country, then the country that has produced the good at lower opportunity cost is said to have a comparative advantage in the production of that good.

Absolute Advantage:

It refers to the ability of a country to produce the same good with same resources at lower cost.