Bill and Sue both make shirts and shoes. Bill can make 2 shirts in an hour and Sue can make 6 shirts in an hour. Bill can make 3 pairs of shoes in an hour and Sue can make 4 pairs of shoes in an hour.

a.) What is Bill's opportunity cost of making a shirt? What about a shoe? What is Sue's opportunity cost of making each good? Explain your reasoning. Assuming shirts and shoes are equally valuable (i.e. exchange 1:1), who has the comparative advantage in shirts? In shoes?

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Answer To find the opportunity cost we look at what is given up to produce one more unit of a good ... View the full answer