Question

Dave and Jennifer decide to join forces to improve both of their classes. A good class consists of solving awesome problems and making nerdy references. Jennifer explains there may be gains from trade. Given the production chart below, who should focus on what?

	Make Nerdy References	Solve awesome Problems
Dave	40	50
Jennifer	20	100

No gains from trade

Jennifer on solving awesome problems and Dave on making nerdy references

Dave has an absolute advantage in both

Dave on solving cool problems and Jennifer making nerdy references

Jennifer has an absolute advantage in both

Answer 1

Answer
option 2
Jennifer on solving awesome problems and Dave on making nerdy references

this depends on the comparative advantage which depends on the opportunity cost
the opportunity cost of a good =maximum of other option/maximum of the option
the opportunity cost of the Make Nerdy References for Dave =50/40=0.8
the opportunity cost of the Make Nerdy References for Jennifer=100/20=5
so Dave has the comparative advantage in the Make Nerdy References because of lower opportunity cost