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A. The opportunity cost of producing 9 pizzas for Nino is _____ salads. The opportunity cost of producing 1 pizza is _____ salads.

B. The opportunity cost of producing 6 pizzas for Tony is _____ salads. The opportunity cost of producing 1 pizza is _____ salads.

C. The opportunity cost of preparing 36 salads for Nino is ______ pizzas. The opportunity cost of preparing 1 salad is _____ pizzas.

D. The opportunity cost of preparing 12 salads for Tony is ______ pizzas. The opportunity cost of preparing 1 salad is ______ pizzas.

E. Who has the lower opportunity cost for making pizzas? _______

F. Who has the lower opportunity cost for preparing salads? ________

G. Who should produce pizzas? _________ Salads? _________

H. How will specialization affect the running of the pizza shop? _______

Answer :

The above prompt is about opportunity cost.

What is the result of the opportunity cost analysis?

  • 36 salads are lost as a result of Nino making 9 pizzas. His opportunity cost of making 1 pizza is therefore equal to 4 salads.
  • Producing 6 pizzas would cost Tony the potential cost of 12 salads. His opportunity cost of making 1 pizza is thus 2 salads.
  • Nino lost out on nine pizzas as a result of making 36 salads. His opportunity cost for making one salad is therefore equal to 1/4 of a pizza.
  • For Tony, making 12 salads costs the same as 6 pizzas. His potential cost of making one salad is therefore equal to half of a pizza.
  • Who has the lower opportunity cost for making pizzas? Tony does
  • Who has the lower opportunity cost for preparing salads? Nino does
  • Who has the comparative advantage in producing pizzas? Tony Salads? Nino
  • How will specialization affect the running of the pizza shop? Tony will specialize in pizzas and Nino will specialize in salads.

Note that the value of the best alternative foregone when, due to limited resources, a decision must be made between numerous mutually incompatible alternatives is known as the opportunity cost in microeconomic theory.

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