Calculating Opportunity Cost

“I saw how you did the Gilligan and Mary Ann example in class but I’m not sure how to answer this problem.”

First, find the opportunity cost of producing one unit of each good. The “cost” is in terms of the other good. The following example applies to Tivoli. You’re given that in one month they can produce either 30 pounds of spaghetti (no meatballs) or 50 pounds of meatballs (no spaghetti). You can find the opportunity cost by starting with the equation:

30 lbs spaghetti = 50 lbs meatballs

To get the opportunity cost of spaghetti in terms of meatballs, solve the above equation for 1 lb of spaghetti. That is, divide both sides by 30. So

30 lbs/30 = 50lbs/30 or 1 lb spaghetti = 5/3 lbs meatballs.

Similarly, the opportunity cost of a pound of meatballs can be found by dividing both sides by 50. So 30 lbs/50 = 50 lbs/30 or 1 lb meatballs = 3/5 spaghetti.

Do the same for Frivoli. When you have calculated the opportunity costs for both goods in both tribes, you can then compare who has the lowest opportunity costs and, hence, comparative advantages.

It doesn't matter if you draw the PPFs on the same set of axies or separate diagrams.

P.S. In referencing the text, I was mistaken when mentioning the opportunity cost/comparative advantage example. It is "Tom and Hank" as "Castaways". Your PPFs should look like Figure 2-4 on p. 26.