Comments on Problem Set #1

I’ve received a few inquiries regarding the homework and I’d like to share what I’ve shared with everyone else concerning a few of the problems.

Problems 1 and 2:

“How much should we write?” A few sentences each should be suffice. One sentence probably won’t cover the necessary details. Five sentences would be saying too much.

Problem 3:

“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.

“Do we have to do a trade?” Well, I think part C just asks if they could gain from a trade. The answer ought to be obvious. Also, if you think “hmm, what is a good trade”, you ought to conclude that a price of 1 lb meatball for 1 lb of spaghetti ought to be a mutually advantageous trade. You can probably show trading some amount of meatballs for spaghetti at this price will allow each tribe to consume outside their PPF.

Problem 4:

You should be able to use the “trick” above. You can set each person’s batting average to their free throw percentage. Then solve each for 1. You’ll be able to rank the best hitters, in terms of foregone free throw percentage. The top two hitters in terms of opportunity cost will be the worst two free throw shooters, relatively speaking. (Solving for best free throw shooters, you’ll find the ranking then is opposite.) Be careful, the argument is on relative ability to hit/shoot, not absolute ability to hit/shoot.

I hope this helps. Good luck.