Opportunity costs of buying a home
a. Assume you have just received your college degree. You are excited to be finished because next month you will be starting a new job with a high salary. With this new change in life, you have decided to buy your first home. List 3 opportunity costs of buying a home and explain each cost in 2-4 sentences. Remember that opportunity costs are the things that you give up by choosing to buy a home.
b. Rachel has decided to start her own business – Rachel’s Sweet Treats – baking and selling cakes and cookies. Use the table attached to answer the following questions: Draw a production possibilities curve to showcase the options for Rachel. Feel free to use a Word or Excel document to create the graph. Determine the opportunity costs for a move from B to C. Remember that to make more cakes, you have to give up cookies. How many cookies would you have to give up to make 6 cakes instead of 4 cakes?
c. Rachel’s Sweet Treats is located near another bakery, Sarah’s Bakery. Rachel can make 4 cakes or 3 dozen cookies each day. Sarah can make 6 cakes or 12 dozen cookies each day. Who has an absolute advantage in the bakery business and explain your answer? Who has the comparative advantage in making cakes and explain your answer? Who has the comparative advantage in making cookies and explain your answer?
