Sam’s Appliance Outlet has variable expenses of 40% of sales. The manager reported monthly fixed expenses of $270,000. The month
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Answer:
<u>4 bushels, 2 bushels, Bellisima, Euphoria</u>
Explanation:
Remember, opportunity cost as used in this context<em> refers to the loss of other profit alternatives when one alternative is chosen</em>. In this scenario if we consider the two neighboring countires called Acadia and Euphoria. Both have 4 million labor hours per month that they can use to produce corn, jeans, or a combination of both.
Euphoria produces <em>4 bushels of corn per hour and 16 pairs of jeans</em><em>. </em>Acadia produces<em> 5 bushels of corn per hour and 10 pairs of jeans.</em> Euphoria produces <em>12 million bushels of corn and 16 million pairs of jeans</em> and Acadia produces <em>5 million bushels of corn and 30 million pairs of jeans.</em>
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<u>Euphoria's opportunity cost of producing one bushel of corn is</u> = 4 pairs of jeans and
<u>Acadia's cost of producing one bushel of corn is </u>= 2 pairs of jeans.
Finanlly, It is obvious that Acadia has the comparative advantage of producing corn, and Euphoria has the comparative advantage of producing jeans.