Case Study 1
1.What is the maximum number of shirts Taylor can make in a day?
Working at 8hrs per day she can make at least 80 shirts,10 shirts per hour.
2. what is the maximum number of pants Taylor can make in a day?
Working at 8hrs per day she can make at least 160 pants,20 pants per hour.
3. what is the opportunity cost of making one pair of pants (in terms of the amount of shirts
Taylor won't be able to make)? As an example, when you give up $20 in exchange for 40
pencils, you can say that the “cost “per pencil was $0.50 because $20 / 40 = $0.50.
The opportunity cost is in the time she spends making 10 shirts per hour she could use that
time to make 20 pants instead.
4. what is the opportunity cost of making one shirt (in terms of the amount of pants Taylor
won't be able to make)?
The cost of making 1 shirt would be worth 2 pants that could be made. If she wants to be most
efficient in making profits she should work on the pants. This is also assuming that the price for
the pants is around or the same as the cost of 1 shirt to 1 pair of pants.
5. Taylor's friend Alexis can make 10 shirts or 30 pairs of pants in an hour. Who has a lower
opportunity cost of making shirts? In other words, who has a comparative advantage in the
production of T shirts? In the production of shirts, they can both make the same amount so
neither one of them has an advantage over the other. Also, the number of hours she is working
is unknown, so this is assuming she works the same 8 hrs.
6. Imagine now, that Taylor and Alexis are the only shirt and pants producers in their small
town, how would you suggest they spend their time at work to achieve the highest production
of shirts and pants for the town? Explain your rationale.
They should spend their time with Alexis on pants and Taylor on shirts. My reasoning is Alexis
can make more pants, and they can make the same number of shirts. So, Taylor should work
with the shirts while Alexis does the pants.
7. Imagine now, that Taylor completes a training that doubles Taylor's capacity to make both
shirts and pants per hour. a) What is the maximum number of shirts Taylor can make in a day?
b) what is the maximum number of pants Taylor can make in a day? c) what does that tell you
about the value of training (human capital) in production?
If Taylor does the training, she will boost her making to 160 shirts per 8hr day, and 320 pants
per 8hrs.This tells you that the value of the training is very helpful in boosting productivity.
8. which graph best illustrates all the possible maximum combinations of shirts and pants Taylor
can produce in one day?
Graph 2 because it shows per day, she can make 80 shirts or 160 pants.