Question

a. what is venices opportunity cost of producing one pound of pasta?
0.25 bottle(s) of wine
2 bottle(s) of wine
0.5 bottle(s) of wine
4 bottle(s) of wine
b. what is venices opportunity cost of producing one bottle of wine?
4.00 pound(s) of pasta
c. what is florences opportunity cost of producing one pound of pasta?
4 bottle(s) of wine
0.5 bottle(s) of wine
0.25 bottle(s) of wine
2 bottle(s) of wine
d. what is florences opportunity cost of producing one bottle of wine?
pound(s) of pasta
e. (click to select) has the comparative advantage in producing pasta and (click to select) has the comparative advantage in producing wine.

Explanation:

Step1: Define opportunity cost

Opportunity cost = $\frac{\text{Good given up}}{\text{Good produced}}$

Step2: Solve part b (Venice wine OC)

From part a, Venice's pasta OC = $\frac{1}{4}$ wine. Wine OC is reciprocal: $\frac{1}{\frac{1}{4}} = 4$

Step3: Solve part d (Florence wine OC)

From part c, Florence's pasta OC = 2 wine. Wine OC is reciprocal: $\frac{1}{2} = 0.5$

Step4: Compare comparative advantage

Lower OC = comparative advantage. Venice pasta OC ($0.25$ wine) < Florence pasta OC ($2$ wine). Florence wine OC ($0.5$ pasta) < Venice wine OC ($4$ pasta).

Answer:

a. 0.25 bottle(s) of wine
b. 4.00 pound(s) of pasta
c. 2 bottle(s) of wine
d. 0.50 pound(s) of pasta
e. Venice has the comparative advantage in producing pasta and Florence has the comparative advantage in producing wine.