Larry and Megan are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of barley and alfalfa each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing barley or alfalfa or to produce barley on some of the land and alfalfa on the rest. Barley Alfalfa (Bushels per acre) (Bushels per acre) Larry 12 3 Megan 18 6 On the following graph, use the blue line (circle symbol) to plot Larry's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Megan's PPF. 120 108 Larry's PPF 96 84 72 Megan's PPF 60 48 36 24 12 60 120 180 240 300 300 420 480 540 600 BARLEY (Bushels) ALFALFA (Bushels)
Larry and Megan are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of barley and alfalfa each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing barley or alfalfa or to produce barley on some of the land and alfalfa on the rest. Barley Alfalfa (Bushels per acre) (Bushels per acre) Larry 12 3 Megan 18 6 On the following graph, use the blue line (circle symbol) to plot Larry's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Megan's PPF. 120 108 Larry's PPF 96 84 72 Megan's PPF 60 48 36 24 12 60 120 180 240 300 300 420 480 540 600 BARLEY (Bushels) ALFALFA (Bushels)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Larry and Megan are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of barley and alfalfa each farmer can
produce per year on a given acre. Each farmer chooses whether to devote all acres to producing barley or alfalfa or to produce barley on some of the
land and alfalfa on the rest.
Barley
Alfalfa
(Bushels per acre) (Bushels per acre)
Larry
12
3
Megan
18
6
On the following graph, use the blue line (circle symbol) to plot Larry's production possibilities frontier (PPF), and use the purple line (diamond
symbol) to plot Megan's PPF.
120
108
Larry's PPF
96
84
72
Megan's PPF
48
36
24
12
60
120
180
240
300
380
420
480
540
600
BARLEY (Bushels)
ALFALFA (Bushels)
Transcribed Image Text:has an absolute advantage in the production of barley, and
has an absolute advantage in the production of alfalfa.
Larry's opportunity cost of producing 1 bushel of alfalfa is
bushels of barley, whereas Megan's opportunity cost of producing 1 bushel of
alfalfa is
bushels of barley. Because Larry has a
opportunity cost of producing alfalfa than Megan,
has a
comparative advantage in the production of alfalfa, and
has a comparative advantage in the production of barley.
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Transcribed Image Text:**Understanding Absolute and Comparative Advantage in Production:**
1. **Absolute Advantage in Production:**
- **(Name)** has an absolute advantage in the production of barley.
- **(Name)** has an absolute advantage in the production of alfalfa.
2. **Analyzing Opportunity Costs and Comparative Advantage:**
- Larry’s opportunity cost of producing 1 bushel of alfalfa is **(Value)** bushels of barley.
- Megan's opportunity cost of producing 1 bushel of alfalfa is **(Value)** bushels of barley.
Because Larry has a **(lower/higher)** opportunity cost of producing alfalfa than Megan, **(Name)** has a comparative advantage in the production of alfalfa.
Similarly, **(Name)** has a comparative advantage in the production of barley.
**Key Points to Understand:**
- **Absolute Advantage:** This pertains to who can produce a good using fewer resources or more efficiently.
- **Comparative Advantage:** This refers to who can produce a good at a lower opportunity cost.
**Application in Economics:**
- These concepts are crucial in determining how individuals, businesses, and nations allocate resources efficiently in the production of different goods and services. By specializing in the production of goods where they have a comparative advantage, they can trade to mutual benefit, leading to overall economic growth and improved standards of living.
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