Economics Spring 18-DReppas Quiz: Chapter 2 Check Your Understanding Assignment

Question

Economics Spring 18-DReppas Quiz: Chapter 2 Check Your Understanding Assignment This Question: 1 pt In one hour, Sue can produce 70 caps or 21 jackets and Tessa can produce 50 caps or 25 jackets. Sue's opportunity cost of producing a cap is jackets and Tessa's opportunity cost of producing a cap is _ has a comparative advantage in producing caps. , jackets. " Sue and Tessa each specialize in producing the good in which they have a comparative advantage and trade, 0 A. 3.3; 2.0: Tessa, both Sue and Tessa gain O B. 0.3;0.50; Tessa: Tessa gains but Sue loses O c. 0.3; 0.50: Sue: both Sue and Tessa gain O D. 3.3; 2.0; Sue; Sue loses but Tessa gains Click to select your answer

Explanation / Answer

Question 1

In one hour, Sue can produce 70 caps or 21 jackets.

So, the opportunity cost of producing 1 cap for Sue is (21/70) 0.3 jackets.

In one hour, Tessa can produce 50 caps or 25 jackets.

So, the opportunity cost of producing 1 cap for Tessa is (25/50) 0.5 jackets.

Sue can produce the caps at lower opportunity cost in comparison to the Tessa.

So, Sue has the comparative advantage in the production of caps.

When both parties specialize in the production of goods in which they have comparative advantage and then trade then in that case they both gain from trade.

So, both Sue and Tessa will gain from trade.

The correct answer is the option (C).

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.