Question

Create a short dialogue of selkirk and pirate jack calculating their opportunity costs to determine their comparative advantage. then write one or two sentences explaining why pirate jack has a comparative advantage in gathering turnips and selkirk has a comparative advantage in digging clams. use the terms comparative advantage and opportunity cost.

Answer 1

Answer:

Opportunity cost is the cost of the lost alternative. It can be calculated by,

$Opportunity Cost =\frac{Units of the Good Sacrificed}{Units of the good gained}$

The country which has a lower opportunity cost is said to have a comparative advantage in producing a good.

In this case,

The opportunity cost of producing Turnip for the two producers is,

For selkirk- $\frac{40}{40} =$1 Clam

For Pirate Jack- $\frac{60}{120} = \frac{1}{2}$ Clam

While, the opportunity cost of producing Clam for the two is given by,

For selkirk- $\frac{40}{40} =$1 Turnip

For Pirate Jack- $\frac{120}{60} = 2$ Turnips

Therefore, as can be seen the opportunity cost of producing Turnip is lower for Pirate Jack. So, Pirate Jack has a comparative advantage in Turnips.

While, Selkirk has a lower opportunity cost in digging clams so, it has a comparative advantage in Clams.