How to extend the narrative to businesses and society

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Reference no: EM13234810

Suppose that two people, Michelle and James each live alone in an isolated region. They each have the same resources available, and they grow potatoes and raise chickens. If Michelle devotes all her resources to growing potatoes, she can raise 200 pounds of potatoes per year. If she devotes all her resources to raising chickens, she can raise 50 chickens per year. (If she apportions some resources to each, then she can produce any linear combination of chickens and potatoes that lies between those extreme points. If James devotes all his resources to growing potatoes, he can raise 80 pounds of potatoes per year. If he devotes all his resources to raising chickens, he can raise 40 chickens per year. (If he apportions some resources to each, then he can produce any linear combination of chickens and potatoes that lies between those extreme points.)

what is michelles opportunity cost of producing potatoes

what is michelles opportunity cost of producing chickens

what is james opportunity cost of producing potatoes

what is james opportunity cost of producing chickens

which person has an absolute advantage in which activities.

which person has comparative advantage in potatoes

which person has comparative advantage in chicken

Suppose that they're thinking of each specializing completely in the area in which they have a comparative advantage, and then trading at a rate of 2.5 pounds of potatoes for one chicken, would they each be better off? Explain?

How would you extend the above narrative to businesses, society as a whole or nations? Explain

Reference no: EM13234810

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