# Opportunity costs..simple macro economics question..

Discussion in 'The Okie Corral' started by geofri, Feb 8, 2010.

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Yeah... I'm actually asking you to do my homework. its due tonight at 11:30. :embarassed:

Humiliating as it may be, I'm really trying to understand this not get a cheap quick answer!

The example in class was easy to follow, something along the lines of Tom can catch 2 fish, or pick one coconut in an hour. His opportunity cost for a coconut would be 2 fish. Or, the cost of a fish would be 1/2 coconut.

But in the problem below, all I am understanding is that if "nancy" replaces a set of brakes in 2 hours, the "cost" would be NOT spending 4 hours on a transmission..

If it stated income from each job the questions would make a lot more sense..

Nancy and Bill are auto mechanics. Nancy takes 4 hours to replace a clutch and 2 hours to replace a set of brakes. Bill takes 6 hours to replace a clutch and 2 hours to replace a set of brakes. State whether anyone has an absolute advantage at either task and, for each task, identify who has a comparative advantage.

• Opportunity cost of set of brakes for Nancy: ______
[not having to spend 4 hrs on a tranny] ?

• Opportunity cost of set of brakes for Bill:_____
(following answer choice "neither","Bill", or "Nancy". )

• ____ has absolute advantage in clutch replacement. (nancy?)
• _____has absolute advantage in brake replacement. (neither?)
• _____has comparative advantage in clutch replacement. (nancy?)
• _____has comparative advantage in brake replacement. (neither?)

I feel like i'm thinking wayy to hard??!!

If this doesn't "click" real soon, or make sense after an explanation here ill talk to the prof about it. Just hoping I can submit this online homework by tonight to get my points.

2. ### viniglock

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BOL.

3. ### Scared_of_zombies

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__nancy__ has absolute advantage in clutch replacement.
__neither___has absolute advantage in brake replacement.
__nancy?___has comparative advantage in clutch replacement.
__nancy___has comparative advantage in brake replacement.

Im not sure though i never took that class

4. ### jtm62CLM

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First, lets start at the beginning. Opportunity cost is the value of the next
best alternative that must be given up to pursue the chosen activity.

For your example the chosen activity is changing brakes.

Both Nancy and Bill can change brakes in 2 hours, but each cannot change a clutch in the same amount of time (4 hours v 6 hours respectively).

For Nancy the opportunity cost of changing a set of brakes is 0.50 of a clutch (2 hours to change brakes that could have been used to change the clutch... 2/4=0.50)

For Bill the opportunity cost of changing a set of breaks is 0.33 of a clutch (2 hours to change brakes that could have been used to change the clutch... 2/6=0.33)

For the second part...

Nancy has absolute advantage when changing a clutch. (because she changes it faster)
Neither has the absolute advantage when changing brakes. (because both do it in the same amount of time)

Nancy has the comparative advantage when changing a clutch.
Bill has the comparative advantage when changing brakes.

Basically for the comparative advantage we can say that that if Nancy and Bill went into business together Nancy would change just clutches because she can do more per shift than bill, and Bill would change only brakes because his production is best served there. (I mess up my explanations on CA... so sorry if this is crap... because it is.)

Where do you go to school?

Last edited: Feb 8, 2010
5. ### 20South

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This!

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AHHHHHHhhhhhhhhhhhhhhhhhh.................

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click.

Love the feeling after getting the answer to something that you should have been able to do in your sleep, but couldn't figure out for the life of you!

I get caught thinkin' basakwards and lose common sense..

8. ### jameI don't even know....what I'm doing here....

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Let's see..........

You're in college, not doing your homework, screwing around on a gun/social forum, and you want someone else to do your homework for you. And you won't even go through the effort to google the answer

BASIC homework.

......that should be easy if you're using your text book.

(sorry for the rant. I'm a Dad that's helping my kids pay for college.....)

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Thank you very much guys!

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No, I did, but the names were josh and tom, so it wouldn't work!

(^that was a joke)

Last edited: Feb 8, 2010
11. ### viniglock

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Sorry, not my place to lecture. But be aware that there is a tool utilized by colleges known as Turnitin and would do you no good when it comes to many homework assignments.

Best strategies:
1) Ask questions when you do not understand something.
2) Study groups and partners is a good thing.
3) Tutoring.

Getting the answer from someone that want to show off that they know the stuff will not help your case on the contrary they are setting you up for failure, especially when the exams comes (is you alone and no one to help you), you need to understand the concepts, because there is so much that you get by charms, but then you will need to show for it. So, study hard and prioritize your time.

Best of luck, you will need it.

12. ### BobbyT

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OP, you were right on the first 3 but not the last.

Even though they take the same amount of time to do brakes, Bill has a comparative advantage. You can think of it as being because Nancy's more efficient changing clutches, leaving Bill with the "leftovers", but a better way to think of it might be this:

If they both start out splitting their time between both tasks, switching over to just brakes will cost them clutches. For each hour they shift from clutch work to brake work, they'll gain the same amount of brakes but it'll cost Bill fewer clutches. Bill could even be less efficient at brake jobs than Nancy but still have a competitive advantage there, if it costs him that much less in clutches vs. Nancy to switch.

13. ### certifiedfundsCosmopolitan Bias

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nullset dood. always guess nullset.

or "C"

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15. ### buckhunter3987

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The reason you were having trouble with that I am assuming is as you stated, if the problem had given you income values, instead of time to do something. But in that question time is income. Think of it like this Bill and Nancy get paid by the job, so therefore if all they had were brake jobs in a given day they Both would make the same amount of money. Yet if only clutch jobs came in on a given day nancy could make more because she can complete more jobs than bill.

The answer above is what you needed, I'm just trying to help you figure out the logic behind it.

16. ### hvnit2gd

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I think you are being too hard on the guy... whats wrong with asking for help? If someone here is better able to explain the concept to him than his professor, then why not utilize that resource? Heck, I partly understood what absolute and comparative advantage was, but after reading this thread, I have a little better understanding... again, whats wrong with asking for help?

If the OP is able to take the info he gets from here and apply it to the test... I dont see a problem. The goal is to learn the concept, and I think you should do that in the best way you can. The profs dont always explain things the best... also, if the prof didnt explain it enough or to a point he could understand, I dont think the book will do any better... the books are written by professors!!!

Give the guy a break, he is looking for help... I dont understand why a lot of people on here assume the worst in people... immediately a couple of you assumed this guy was looking for an easy way out! I dont get it...

Would you tell your kid to buzz off if he/she asked you for help with homework? Cmon people... relax with the assumptions for one second of your lives. You will be less stressed out.

17. ### viniglock

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Would you set your kid for failure? No assumptions here, he indicated the facts of what he wanted, simple did not devoted time to study, read, learn the concept, waited until last minute to do homework because is due(homework is part of the grade), and wanted someone to do for him.

From the OP:

Last edited: Feb 9, 2010
18. ### hvnit2gd

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he also said this.... I'm really trying to understand this not get a cheap quick answer!

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I'm paying for my education, so if I wish to blow it all off, not learn and just jump through as many hoops as I can, I don't think its anyones problem but my own.

If you think that is what I am doing, so be it. I certainly don't have the time and energy to prove it to everyone that questions me.

From my original post:

To the several of you that helped to explain the problem, you were very helpful to me, thank you.

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