Answer:
The opportunity cost for Janet to create a pizza amounts to 0.67 gallons of root beer, while for Megan it is 0.71 gallons of root beer.
Janet possesses an absolute advantage in pizza making, and Janet also has a comparative advantage in this activity.
When it comes to trading, Janet will exchange pizza for root beer. The price of pizza can be represented by the amount of root beer in gallons. To ensure both roommates benefit, the highest trade price for pizza is 0.71 gallons of root beer, while the minimum price allowing for mutual benefit is 0.67 gallons of root beer per pizza.
Explanation:
For Janet, the cost to produce one gallon of root beer is 3/2, which equals 1.5 pizzas.
Janet's cost for making a pizza is calculated as 2/3, resulting in 0.67 gallons of root beer.
As for Megan, her cost to produce a gallon of root beer is 7/5, translating to 1.4 pizzas.
Megan's cost of producing a pizza is 5/7, which equals 0.71 gallons of root beer.
Opportunity costs represent the additional expenses or benefits forfeited when electing one action or investment in place of another option. For instance, Janet can create either 1.5 pizzas or 1 gallon of root beer in a span of 3 hours, but she cannot accomplish both simultaneously; she must make a choice between the two options.
