Maximizing Output in a Burrito Store

Question:

Olivia and Susan operate a store that sells burritos and are deciding who should chop the ingredients and who should cook the fillings to maximize output. Which of the following statements are true?

Answer:

For Olivia, the opportunity cost of 1 kg of cooked food is 1.33 kgs of chopped food. (True)
This means that for Olivia to produce 1 kg of cooked food, she has to give up the opportunity to produce 1.33 kgs of chopped food.

For Susan, the opportunity cost of 1 kg of cooked food is 0.67 kgs of chopped food. (True)
This means that for Susan to produce 1 kg of cooked food, she has to give up the opportunity to produce 0.67 kgs of chopped food.

Susan should specialize in chopping. (True)
Since Susan has a lower opportunity cost of producing cooked food (0.67 kgs of chopped food), it is more efficient for her to focus on chopping.

Olivia has an absolute advantage in chopping. (False)
An absolute advantage means being able to produce more of a good using the same resources or producing the same amount of good with fewer resources. The statement does not provide enough information to determine if Olivia has an absolute advantage in chopping.

Understanding Opportunity Cost:

Opportunity cost is the value of the next best alternative forgone when a decision is made. In the context of Olivia and Susan's burrito store, it is important for them to consider the opportunity cost of each activity they undertake. By analyzing the opportunity cost of producing cooked food versus chopped food, they can determine the most efficient allocation of their time and resources.

Calculating Opportunity Cost:

For Olivia, the opportunity cost of 1 kg of cooked food is 1.33 kgs of chopped food. This means that if Olivia decides to cook 1 kg of food, she is giving up the opportunity to produce 1.33 kgs of chopped food. On the other hand, Susan's opportunity cost of 1 kg of cooked food is 0.67 kgs of chopped food. This indicates that Susan gives up the opportunity to produce 0.67 kgs of chopped food when she cooks 1 kg of food.

Specialization and Efficiency:

Based on the calculated opportunity costs, it is clear that Susan should specialize in chopping. Since her opportunity cost of producing cooked food is lower than Olivia's, Susan can produce a greater quantity of cooked food by focusing on chopping. This specialization allows for higher efficiency in the burrito making process.

Absolute Advantage:

While Olivia may have an absolute advantage in other tasks within the store, the statement does not provide enough information to determine if she has an absolute advantage in chopping. Absolute advantage is based on the ability to produce more with the same resources, and without specific production quantities or resource usage data, it is not possible to definitively say if Olivia has an absolute advantage in chopping.