s Environmentalimpactofthe Des x UnitZAssignmentVOpportunit x + v Dr X 6 9 C 0 a bconline.broward.edu/d2l/le/content/551893/viewContent/16507i42/View Q '9 as 3 (a a, El 0 5 College Creator Wedding 6 Link Ninja @ DoubleTSpon Slid\" ]' GlAdvantage 9 havanarnatural a SetUp VourDevicem e Notary Education L", o IMGBINVcomrDow," o PixlrSuite m 27mi|lion+ Stunniv. Instructions OPPORTUNITY COST & COMPARATIVE ADVANTAGE b BACKGROUND lNFORMATlON Read this handout containing information from your textbook about the concepts you will apply in this scenario. POINTS AN D GRADE This assignment contains 8 questions and a total of 100 points. The specific weight of towards your final grade is 4%. SCENARIO INTRODUCTION Use the information provided below to complete the questions, Your friend John works producing dress shirts and dress pants. CurrentlyJohn can work a maximum of 8 hours per day. With the equipment he has, and the current level of expertise, he can finish either 2 shirts or 8 pairs of pants in an hour. This is true when he is performing at full capacity. Meaning doing the best possible work. 1' What is the maximum number of shirts he can make in a day? (10 points) 2. What is the maximum number of pants he can make in a day? (10 points) 3' What is the opportunity cost of making one pair pants (in terms of the amount of shirts he won't be able to make)? As an example when you give up $20 dollars in exchange for40 pencils, you can say that the \"cost" per pencil was $0.50, because $20/4O = $0450, (15 points) 4. What is the opportunity cost of making one shirt (in terms of the amount of pants he won't be able to make)? (15 points) St John's friend Anne, can make 2 shirts or 10 pairs of pants in an hour. Who has a lower opportunity cost of making shirts? In other words, who has a comparative advantage in the production of shirts? Explain your rationale (15 points) 6. Imagine now, that John and Anne are the only shirt and pants producers in their small town, how would you suggest that they spend their time at work to achieve the highest production of shirts and pants for the town? Explain your rationale. (15 points) \"5 Case Study 1_Op.mdocx A Show all X , 74s,: _ , 12:18 PM ' ' Cloudy Q seamh I- D - a l g i a g A :1 3/30/2023 ,. .3 Environmental impact of the Des X UnitZAssignment , Opportunit x + 6 9 C 0 i bconline.broward.edu/d2l/le/content/551893/viewContent/16507142/View College Creator \"5 Case Study 1_Op.,,.docx , 7' 74F Cloudy Wedding 6 Link Ninja @ DoubleTSpon Slid., ]' GlAdvantage 9 havanarnatural a SetUp VourDevice,., e Notary Education L,., o IMGBINcomrDowm o Plxlr Suite E 27mi|lion+ Stunni,. A Your friend John works producing dress shirts and dress pants. CurrentlyJohn can work a maximum of 8 hours per day. With the equipment he has, and the current level of expertise, he can finish either 2 shirts or 8 pairs of pants in an hour. This is true when he is performing at full capacity. Meaning doing the best possible work. 1. What is the maximum number of shirts he can make in a day? (10 points) 2. What is the maximum number of pants he can make in a day? (10 points) 3. What is the opportunity cost of making one pair pants (in terms of the amount of shirts he won't be able to make).7 As an example, when you give up $20 dollars in exchange for40 pencils, you can say that the \"cost" per pencil was $0.50, because $20/4O = $0.50. (15 points) 4. What is the opportunity cost of making one shirt (in terms of the amount of pants he won't be able to make)? (15 points) 5. John's friend Anne, can make 2 shirts or 10 pairs of pants in an hour. Who has a lower opportunity cost of making shirts? In other words, who has a comparative advantage in the production of shirts? Explain your rationale (15 points) 6. Imagine now, that John and Anne are the only shirt and pants producers in their small town, how would you suggest that they spend their time at work to achieve the highest production of shirts and pants for the town? Explain your rationale, (15 points) 7. Imagine now, that John completes a training that doubles his capacity to make both shirts and pants per hour. a) What is the maximum number of shirts he can make in a day? b) What is the maximum number of pants he can make in a day? (15 points) 8. In 250 words, explain the relationship between comparative advantage and specialization, Support your answer with an example. (5 points) INSTRUCTIONS FOR SUBMITTING YOUR RESPONSES Submit your completed Case Study 1 by attaching a MS Word file in this inbox. Type your response on a Microsoft Word file (.doc or .docx file), save it, and upload it through D2L. You MUST submit your response to the appropriate assignment folder by the due date. Work turned in using any format other than Microsoft Word, may not be graded. In addition, work turned in late, via email. in my mailbox or in class WILL receive NO CREDIT. Consideration MAY be given on late assignments for valid documented emergencies. Q Search Lozeallcfntorg Q \\9 it R v D! X @aqu raw Show all X 12:18 PM 3/30/2023 G Environmental impact of the Dee X D21 Unit 2 Assignment - Opportunity X _ Case Study 1_Opportunity Cost & X Case Study 1_Opportunity Cost & X + X C D @ File | C:/Users/angel/Downloads/Case%20Study%201_Opportunity%20Cost%20&%20Production%20Possibilities.pdf R A ... College Creator Wedding Link Ninja Double T Sport Slid... GI Advantage havana - natural Set Up Your Device... Notary Education L... IMGBIN.com - Dow.. Pixlr Suite px 2.7 million+ Stunni... E Case Study 1_Opportunity Cost & Production Possibilities 1 / 2 75% + ... We need to start from the notion that resources (things used to produce other things) are limited, and this limit or scarcity requires us to make choices. Because we can't have it all, we must decide what we are going to have and what we must forgo. Individuals, businesses, and nations face alternatives, and choices must be made. Economics studies how these choices are made. Scarcity is a situation in which the ingredients for producing the things that people desire are insufficient to satisfy all wants. All economic analysis derives from this condition. Wants: What people would buy if their incomes were unlimited. Wants can be thought of goods and services on which we place a positive value. Production: The process of converting resources into goods and services. Economics is the study of the ways individuals, firms (businesses), and society make decisions to allocate limited resources to competing wants. The study of how people make choices under conditions of scarcity. All societies regardless of the country or its 1 circumstances have to answer 3 basic economic questions: (1) What good and services are to be produced? (2) How are these goods and services produced? (3) Who will receive these goods and services? How that is done depends on who owns the resources, and how decisions are made to coordinate production and distribution. In a capitalist or market economy, private individuals and firms own most of the factors resources. The what, how and who decisions are determined by individual desires for good and services and profit-making decisions by firms. Product prices are the principal mechanism for communicating information in the system. Based on prices, consumers decide whether to buy or not, and firms decide how to employ their resources and what technology to use. Producers are free to survive or perish based on their choices. Resources or Factors of Production are things or inputs used in the production of things that people want. We can classify resources into categories; Land, Labor (including Human Capital), Physical Capital and Entrepreneurship or Entrepreneurial Ability. Land is often called the natural resource, and consists of all the gifts of nature (e.g., minerals, trees, etc.). Physical Capital or Capital 2 includes all manufactured resources that are used to produce other goods (e.g., construction crane). It also includes improvements to natural resources, such as irrigation ditches. Labor is the human resource that includes all productive contributions made by individuals who work, involving both mental and physical activities. Human Capital is the accumulated training and education workers receive that increases their productivity. Entrepreneurship refers to human resources that perform the functions of organizing, managing, and assembling other factors of production to create and operate business ventures, and takes the risks associated with introducing new methods and other types of new thinking that could lead to wealth creation. Scarcity requires that choices be made. When one choice is made, then another is given up. Whenever you engage in any activity using any resource you are trading off the use of that resource for one or more alternative uses. For example, the more time devoted to studying economics, the less time that can be devoted to studying history. Thus, a higher grade in economics has a "cost" of a lower history grade. This cost is known in economics as the Opportunity Cost. The highest valued, next-best alternative that must be sacrificed for the choice that was made. In ec nomics, cost is always a forgone opportunity. In a world of scarcity being able to make good use of resources is very important. In other words, efficiency is important. In economics we look at efficiency in 2 ways; Production Efficiency and Allocationficiency. Production Efficiency is the case in which a given level of resources is used to produce the maximum output possible. It is also a situation in which a given output is produced at a minimum cost. Allocationficiency occurs when the mix of goods and services produced is the most desired by society Specialization means working at a relatively well-defined, limited activity. Specialization only makes sense because of the concept of Comparative Advantage. Comparative Advantage is the ability to produce a good or service at a lower opportunity cost compared to other producers. The relationship between Specialization and Comparative Advantage is the basis for exchange. If each person, region, and country specializes in producing those things that they can produce relatively most efficiently, then it is possible to increase output without increasing the total amount of resources. Persons who are making decisions that further their self-interest will make choices that aim to maximize their benefits. The result is that they choose their comparative advantage and end up specializing. Absolute Advantage is the ability to produce more units of a good or service using a given quantity of resource inputs. 74.F Q Search WILOFCB O myhp Dex W 12:27 PM Cloudy 3/30/2023G Environmental impact of the Dee X D21 Unit 2 Assignment - Opportunity X _ Case Study 1_Opportunity Cost & X Case Study 1_Opportunity Cost & X + X C D @ File | C:/Users/angel/Downloads/Case%20Study%201_Opportunity%20Cost%20&%20Production%20Possibilities.pdf R A ... College Creator Wedding Link Ninja Double T Sport Slid... GI Advantage havana - natural Set Up Your Device... Notary Education L... IMGBIN.com - Dow... Pixlr Suite pX 2.7 million+ Stunni... E Case Study 1_Opportunity Cost & Production Possibilities 2 / 2 75% + ... As we have seen, every country has to decide what to produce, how to produce it, and decide who receives the output. Countries desire to do the first two as efficiently as possible by choosing the production method that results in the greatest output using the least amount of resources. How resources are used is as important as the amount of resources available. Every economy faces constraints or limitations. Land, labor, capital, and entrepreneurship are all limited. No country has an infinite supply of available workers or the space and machinery that would be needed to put them all to work efficiently. No country can break free of these natural restraints. Such limits are known as Production Possibilities Frontiers. In fact, individuals, firms and countries in all economies face constraints on their production capabilities. Production can be limited by the quantity of the various resources at hand and by technology. Technology includes such considerations as knowledge about production methods, the country's infrastructure, etc. To further simplify matters, production possibilities analysis assumes that the quantity of resources and the technology available remain constant, and that the economic agent in question (individuals, firms, countries) produces only two products. Although a two-product world sounds far-fetched, this simplification allows us to analyze many important concepts regarding production and tradeoffs. Further, the conclusions drawn from this simple model will not differ fundamentally from a more complex model of the real world. The Production Possibilities Frontier (PPF) is a graph that shows the maximum combinations of two goods that are possible to produce. Points on or inside the PPF are attainable, and those outside of the frontier are unattainable. Using the production possibilities analysis is the simplest way to illustrate the Opportunity Cost associated with choices, as well as the concept of Comparative Advantage. Recall that Opportunity Cost is the highest valued, next-best alternative that must be sacrificed for the choice that was made. In economics, cost is always a foregone opportunity. Comparative Advantage is the ability to produce a good or service at a lower opportunity cost compared to other producers or other productive activities. Absolute Advantage is the 2 ability to produce more units of a good or service using a given quantity of resource inputs. Increasing Opportunity Costs: In most cases, land, labor, and capital cannot easily be shifted from producing one good or service to another. You cannot take a semitrailer and use it to plow a field, even though the semi and a top-of-the-line tractor cost about the same. The fact is that some resources are suited to specific sorts of production, just as some people seem to be better suited to performing one activity over another. Some people have a talent for music or art, and they would be miserable-and inefficient-working as accountants or computer programmers. Some people find they are more comfortable working outside, while others require the amenities of an environmentally controlled, ergonomically designed office. Thus, a more realistic production possibilities frontier is concave to (or bowed away from) the origin (see graph below), because opportunity costs rise as more factors are used to produce increasing quantities of one product. However, if you are comparing two productive activities that are very similar, and resources can be shifted from one activity to the next without much effort, you might end up with a downward sloping straight line. 12 8 Opportunity Costs Point Backpacks Tablets (backpacks/tablets) Backpacks (thousands) 6.000 3,200 ,000/3,200 = 0.625 D00/800 = 7.50 Tablets (thousands) 74.F Cloudy Q Search VILOFCB O myhp Dex W 12:27 PM 3/30/2023