Opportunity Cost and Comparative Advantage

Who has the ABSOLUTE advantage in making earrings?

• Marie

• Isabella

Who has the ABSOLUTE advantage in making bracelets?

• Marie

• Isabella

What is Marie's opportunity cost of making earrings?

• 3/2 (1.5) bracelets

• 2/3 (.67) bracelets

• 3/2 (1.5) earrings

• 2/3 (.67) earrings

What is Marie's opportunity cost of making bracelets?

• 3/2 (1.5) bracelets

• 2/3 (.67) bracelets

• 3/2 (1.5) earrings

• 2/3 (.67) earrings

What is Isabella's opportunity cost of making earrings?

• 1/2 (0.5) bracelets

• 2 bracelets

• 1/2 (0.5) earrings

• 2 earrings

What is Isabella's opportunity cost of making bracelets?

• 1/2 (0.5) bracelets

• 2 bracelets

• 1/2 (0.5) earrings

• 2 earrings

Who has the COMPARATIVE advantage in making bracelets?

• Marie

• Isabella

Who has the COMPARATIVE advantage in making earrings?

• Marie

• Isabella

For Marie and Isabella to benefit the most, what should happen?

• Marie should make bracelets and Isabella should make earrings and they trade.

• Marie should make earrings and Isabella should make bracelets and they trade.

• They should both make their own bracelets and earrings and not trade.

Who has the ABSOLUTE advantage in producing cotton?

• America

• Brazil