Pam and Jeanne are knitting hats and scarves for the homeless this winter. It takes Pam 4 hours to knit one hat, and 4 hours to knit one scarf. It takes Jeanne 8 hours to knit one hat and 5 hours to knit one scarf. They each can devote 40 hours to this project, and want to maximize items knitted for the homeless.

1. (2 points) What is the opportunity cost of knitting a hat for Pam? What is her opportunity cost of knitting a scarf? 2. (2 points) Who has the absolute advantage in knitting scarves, and who has the absolute advantage in knitting hats? 3. (3 points) Who has the comparative advantage in knitting hats and who has the comparative advantage in knitting scarves? 4. (3 points) Pam and Jeanne are told that the homeless community needs exactly 10 scarves. Assuming they work together and use their time efficiently, how many hats can they knit given their 40 hour constraint?

Answer rating: 100% (QA)

1 Opportunity Cost The opportunity cost of knitting a hat for Pam is the number of scarves she could have knitted in the same amount of time it takes ... View the full answer