Economics

In the scenario of Michelle and James where Michelle produces 200 pounds potatoes with the resources she has or she can raise 50 chickens. As for James he can produce 80 pounds of potatoes or raise 40 chickens. Q. What is Michelle’s opportunity cost of producing potatoes' A. Michelle’s opportunity cost for producing potatoes is 4 pounds of potatoes for each chicken raise. Q. What is Michelle’s opportunity cost of producing chickens' A. Michelle’s opportunity cost for producing chickens is ¼ of a chicken for every pound of potatoes produced. Q. What is James’ opportunity cost of producing potatoes' A. James’ opportunity cost of producing potatoes is 2 pounds of potatoes for every chicken raised. Q. What is James’ opportunity cost of producing chickens' A. James’ opportunity cost of producing chickens is ½ of a chicken for every pound of potatoes. Q. Which person has an absolute advantage in which activities' A. Michelle has an absolute advantage in producing potatoes because she can produce double the amount of potatoes as James. Q. Which person has comparative advantage in potatoes' A. Michelle has comparative advantage because it will cost her less to produce the potatoes. She can produce 4 pounds per chicken versus James producing 2. Q. Which person has comparative advantage in chickens' A. James has the comparative advantage because he can produce chickens at a lower cost. He produces ½ a chicken per a pound of potatoes and Michelle can only produce ¼. If both individual would specialize completely in the areas they have a comparative advantage in and then trade at a rate of 2.5 pounds of potatoes for 1 chicken, James would be better off because he would increase his productivity by 25 percent and Michelle’s productivity would decrease by 37.5 percent. When looking at this model, we find that just because you produce more does not mean you will have the best cost. Society has almost assumed that more is better which place us as a whole in the economic situation we are in now. We as a nation need to analyze our resources and become more conscience to providing quality over quantity.