### What is the opportunity cost of an increase in income

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##### Reference no: EM13209832

The following numbers measure the tradeoff between
Total
Hours
Hours
Studying GPA
Hours
Working Income
60 60 4.0 0 \$0
60 40 3.0 20 \$100
60 30 2.0 30 \$150
60 10 1.0 50 \$250
60 0 0.0 60 \$300
a. Calculate the opportunity cost of an increase in the number of hours spent studying in order to earn a 3.0 grade point average (GPA) rather than a 2.0 GPA.
b. Is the opportunity cost the same for a move from a 0.0 GPA to a 1.0 GPA as it is for a move from a 1.0 GPA to a 2.0 GPA?
c. What is the opportunity cost of an increase in income from \$100 to \$150?

Suppose a second individual has the following
Total
Hours
Hours
Studying GPA
Hours
Working Income
60 50 4.0 10 \$60
60 40 3.0 20 \$120
60 20 2.0 40 \$240
60 10 1.0 50 \$300
60 0 0.0 60 \$360
b. Does either individual (the one in exercise 4 or the one in exercise 5) have a comparative advantage in both activities?
c. Who should specialize in studying and who should specialize in working?

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 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

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