Opportunity Cost

3. Opportunity Cost 'r'vette and Cho are roommates. They spend most of their time studying [of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Yvette takes 5 hours to brew a gallon of root beer and 3 hours to make a pizza. Cho takes 8 hours to brew a gallon of root beer and 4 hours to make a pizza. Yvette's opportunity cost of making a pizza is v of root beer, and Cho's opportunity cost of making a pizza is v of root beer. v has an absolute advantage in making pizza, and v has a comparative advantage in making pizza. If Yvette and Cho trade foods with each other, v will trade pizza in exchange for root beer. The price of pizza can be expressed in terms of gallons of root beer. The highest price at which pizza can be traded that would make both roommates better off is v of root beer, and the lowest price that makes both roommates better off is V of root beer per pizza. zza is of r 1/2 gallon e in m 2 gallons 3/5 gallon other ll trade 1 2/3 gallons erms of gallons of root beer. Troot beer. has a Cho and Cho t Yvette The price of pizza c better off is