Table 2-7
Table 2-7 shows the output per week of two people,Minnie and Mickey.They can either devote their time to making hats or making umbrellas.
-Refer to Table 2-7.What is Minnie's opportunity cost of making a hat?
A)1/5 of an umbrella
B)1/4 of an umbrella
C)4 umbrellas
D)10 umbrellas

Question

Table 2-7
  Table 2-7 shows the output per week of two people,Minnie and Mickey.They can either devote their time to making hats or making umbrellas.
-Refer to Table 2-7.What is Minnie's opportunity cost of making a hat?
A)1/5 of an umbrella 
B)1/4 of an umbrella 
C)4 umbrellas 
D)10 umbrellas

Quizplus · Accepted Answer

The opportunity cost of making a hat for Minnie is 1/4 of an umbrella, since she can make 4 hats or 1 umbrella in a week. Therefore, if she chooses to make a hat, she is giving up the opportunity to make 1/4 of an umbrella.

The best choice depends on what they value more - hats or umbrellas. If they both value hats and umbrellas equally, then they should choose to specialize in producing the item that they have a comparative advantage in. Based on the table, Minnie has a comparative advantage in making hats since her opportunity cost of making a hat is lower than Mickey's opportunity cost. Therefore, Minnie should specialize in making hats and Mickey should specialize in making umbrellas in order to maximize their total output. However, if they have different preferences for hats and umbrellas, their decision might be different.

Table 2-7 Table 2-7 Shows the Output Per Week of Week