Answer to Question #264896 in Microeconomics for lucas

Question

 The following table shows the potential output combinations of oranges and jars of prickly pear jelly (from the flower of the prickly pear cactus) for Florida and Arizona. a) Compute the opportunity cost of oranges in Florida in terms of jars of prickly pear jelly. Do the same for prickly pear jelly in terms of oranges. b) Compute the opportunity cost of oranges in Arizona in terms of jars of prickly pear jelly. Do the same for prickly pear jelly in terms of oranges. c) Would it make sense for Florida to specialize in producing oranges and for Arizona to specialize in producing prickly pear jelly and then trade? Why or why not? Florida Arizona Oranges Prickly Pear Jelly Oranges Prickly Pear Jelly 0 10 0 500 50 8 20 400 100 6 40 300 150 4 60 200 200 2 80 100 250 0 100 0

Answer 1

(a)

(i)

Florida opportunity cost of producing one unit of orange in terms of prickly pear jelly is:

(ii)

Florida opportunity cost of producing one unit of prickly pear jelly in terms of orange is:

(b)

(i)

Arizona opportunity cost of producing one unit of orange in terms of prickly pear jelly is:

(ii)

Arizona opportunity cost of producing one unit of prickly pear jelly in terms of orange is:

(c)

It would make sense for Florida to specialize in production of oranges and Arizona to specialize in the production of prickly pear jelly . This is because Florida has comparative advantage producing orange while Arizona has a comparative advantage of producing prickly pear jelly.