A doctor earns $250,000 per year, while a professor earns $40,000. They play tennis against each other each Saturday morning, each giving up a morning of relaxing, reading the paper, and playing with their children. They could each decide to work a few extra hours on Saturday and earn more income. But they choose to play tennis or to relax around the house. Are their opportunity costs of playing tennis different? Plot the PPC of a nation given by the following data.
Combination Health Care All Other Goods
A 0 100
B 25 90
C 50 70
D 75 40
E 100 0
a. Calculate the marginal opportunity cost of each combination.
b. What is the opportunity cost of combination C?
c. Suppose a second nation has the following data. Plot the PPC, and then determine which nation has the comparative advantage in which activity. Show whether the two nations can gain from specialization and trade.
Combination Health Care All Other Goods
A 0 50
B 20 40
C 40 25
D 60 5
E 65 0