Create a short dialogue of selkirk and pirate jack calculating their opportunity costs to determine their comparative advantage. then write one or two sentences explaining why pirate jack has a comparative advantage in gathering turnips and selkirk has a comparative advantage in digging clams. use the terms comparative advantage and opportunity cost.

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pristina pristina · Answer 1 · 2018-09-11T18:11:07+02:00

Answer:

Opportunity cost is the cost of the lost alternative. It can be calculated by,

[tex]Opportunity Cost =\frac{Units of the Good Sacrificed}{Units of the good gained}[/tex]

The country which has a lower opportunity cost is said to have a comparative advantage in producing a good.

In this case,

The opportunity cost of producing Turnip for the two producers is,

For selkirk- [tex]\frac{40}{40} =[/tex]1 Clam

For Pirate Jack- [tex]\frac{60}{120} = \frac{1}{2}[/tex] Clam

While, the opportunity cost of producing Clam for the two is given by,

For selkirk- [tex]\frac{40}{40} =[/tex]1 Turnip

For Pirate Jack- [tex]\frac{120}{60} = 2[/tex] Turnips

Therefore, as can be seen the opportunity cost of producing Turnip is lower for Pirate Jack. So, Pirate Jack has a comparative advantage in Turnips.

While, Selkirk has a lower opportunity cost in digging clams so, it has a comparative advantage in Clams.