Question

The table below presents the production possibilities schedules for the cities of Venice and Florence, each of which produces pasta and wine.

Production Possibilities Schedules for Venice and Florence
Venice Florence
Pasta (pounds) Wine (bottles) Pasta (pounds) Wine (bottles)
100 0 50 0
50 25 25 10
0 50 0 20

a. What is Venice's opportunity cost of producing one pound of pasta?

b. What is Venice's opportunity cost of producing one bottle of wine?

c. What is Florence's opportunity cost of producing one pound of pasta?
2.5 bottles of wine
0.4 bottle of wine
0.5 bottle of wine
2 bottles of wine

d. What is Florence's opportunity cost of producing one bottle of wine?

______ pound(s) of pasta

e. _______ has the comparative advantage in producing pasta and ______ has the comparative advantage in producing wine.

Answer 1

Venice's opportunity cost of producing one pound of pasta is 2.5 bottles of wine. Florence's opportunity cost of producing one pound of pasta is 0.5 bottle of wine. Venice's opportunity cost of producing one bottle of wine is 0.4 pound of pasta. Florence's opportunity cost of producing one bottle of wine is 2 pounds of pasta. Florence has the comparative advantage in producing pasta, while Venice has the comparative advantage in producing wine.

Step-by-step explanation:

a. The opportunity cost of producing one pound of pasta in Venice is 2.5 bottles of wine. This means that for every pound of pasta produced, Venice has to give up producing 2.5 bottles of wine.

b. The opportunity cost of producing one bottle of wine in Venice is 0.4 pound of pasta. This means that for every bottle of wine produced, Venice has to give up producing 0.4 pound of pasta.

c. The opportunity cost of producing one pound of pasta in Florence is 0.5 bottle of wine. This means that for every pound of pasta produced, Florence has to give up producing 0.5 bottle of wine.

d. The opportunity cost of producing one bottle of wine in Florence is 2 pounds of pasta. This means that for every bottle of wine produced, Florence has to give up producing 2 pounds of pasta.

e. Florence has the comparative advantage in producing pasta, while Venice has the comparative advantage in producing wine.