Question

Suppose Martha and Julia both work at a bakery making bread and muffins. In an hour, Martha can either make 10 loaves of bread or 40 muffins, while Julia can either make 12 loaves of bread or 60 muffins. Both Martha and Julia work 8 hours a day.

C. What is the opportunity cost to each of making one loaf of bread? Martha's opportunity cost of making a loaf of bread muffin:s Julia's opportunity cost of making a loaf of bread d. What is the opportunity cost to each of making one muffin? Instructions: Enter your responses rounded to two decimal places Martha's opportunity cost of making a muffin: 4.00 loaves of bread Julia's opportunity cost of making a muffin: 4.88 loaves of bread e. Who has the comparative advantage in making bread? 0muffins Neither Julia Martha f. Who has the absolute advantage in making bread? Martha Julia Neither g. Suppose you are the owner of the bakery. If Julia and Martha are currently both spending all of their time making muffins, then which of them should you ask to start making bread? Julia because her opportunity cost of making bread is lower than Martha's Martha because her opportunity cost of making bread is lower than Julia's Julia because her opportunity cost of making bread is higher than Martha's Martha because her opportunity cost of making bread is higher than Julia's. *

Answer 1

Opportunity cost is a cost which the sacrifice made for the production of this unit. it is the cost o the next best thing sacrificed. in this case, Martha and Julia have two option either make bread or muffins hence if one of them decides to make bread for an hour say Martha then her opportunity cost is the production of muffins and if Julia opts for making muffins her opportunity cost is the cost of production of the bread

c)

• Martha's opportunity cost ;

in the time o making 10 loaves of bread, she could have made 40 muffins and hence in the time of making one loaf of bread she could have made 4 muffins hence 4 muffins is the opportunity cost.

• Julia's opportunity cost;

in the time of making 12 loaves of bread, she could have made 60 muffins and hence in the time of making one loaf of bread she could have made 5 muffins(60/12) hence 5 muffins is the opportunity cost.

d)

• Martha's opportunity cost;

in the time of making 40 muffins, she could have made 10 loaves of bread and hence in the time of making one muffin she could have made 0.25 loaves of bread hence 0.25 loaves is the opportunity cost.

• Julia's opportunity cost;

in the time of making 60 muffins, she could have made 12 loaves of bread and hence in the time of making one muffin she could have made 0.2 loaves of bread(12/60) hence 0.2 loaves is the opportunity cost.

e) Martha has the comparative advantage because her opportunity cost is lower than Julia when making bread as she produces lesser than Julia in both cases

f) Julia has the absolute advantage in making bread as she actually produces more in number than Martha.

g) Martha because the opportunity cost of making bread is lower than Julia's.