ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:QUESTION 7
Olivia and Susan operate a store that sells burritos. There are two main activities: chopping up the ingredients and then cooking the fillings
for the burritos. Olivia and Susan are deciding who should chop the ingredients and who should cook the fillings in order to maximise
output.
Olivia
Susan
Chopped Food
(kg/hr)
15
20
Cooked Food
(kg/hr)
20
30
Which of the following statements are true:
For Olivia, the opportunity cost of 1kg of cooked food is 1.33kgs (to 2 decimal places) of choppectood.
For Susan, the opportunity cost of 1kg of cooked food is 0.67kgs (to 2 decimal places) of chopped food.
Susan should specialise in chopping.
Olivia has an absolute advantage in chopping.
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