Question

Van and Amy are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of barley and alfalfa each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing barley or alfalfa or to produce barley on some of their land and alfalfa on the rest.
Barley Alfalfa
Bushels per acre Bushels per acre
Van 40 8
Amy 28 7

(Amy, Van) has an absolute advantage in the production of barley, and (Amy, Van) has an absolute advantage in the production of alfalfa.

Van's opportunity cost of producing 1 bushel of alfalfa is (-------------------- )bushels of barley whereas Rina's opportunity cost of producing 1 bushel of alfalfa is (----------) bushels of barley. Because Van has a (higher, lower) opportunity cost of producing alfalfa than Amy, (Amy, Van) has a comparative advantage in the production of alfalfa, and (Amy, Van) has a comparative advantage in the production of barley

Answer 1

Answer:

VAN has an absolute advantage in the production of barley, and VAN has an absolute advantage in the production of alfalfa.

Van's opportunity cost of producing 1 bushel of alfalfa is 0.2 bushels of barley whereas Rina's opportunity cost of producing 1 bushel of alfalfa is 0.25 bushels of barley.

Because Van has a HIGHER opportunity cost of producing alfalfa than Amy, AMY has a comparative advantage in the production of alfalfa, and VAN has a comparative advantage in the production of barley

Explanation:

                                  Barley                   Alfalfa

                       Bushels per acre     Bushels per acre

Van                              40                           8

Amy                             28                           7

Van's opportunity cost of producing barley = 8 / 40 = 0.2 bushels of alfalfa

Van's opportunity cost of producing alfalfa = 40/ 8 = 5 bushels of barley

Amy's opportunity cost of producing barley = 7 / 28 = 0.25 bushels of alfalfa

Amy's opportunity cost of producing alfalfa = 28 / 7 = 4 bushels of barley

Opportunity costs are additional costs or any benefits lost from choosing one activity or investment over another alternative.