Question

1.   An economy has two workers, Jen and Rich. Every day they work, Jen can produce...

1.   An economy has two workers, Jen and Rich. Every day they work, Jen can produce 2 TVs or 10 radios, and Rich can produce 4 TVs or 12 radios. _______ has the comparative advantage in TVs and _______ has the comparative advantage in radios.

A. Jen; Jen

B. Rich; Rich

C. Jen; Rich

D. Rich; Jen

2. An economy has two workers, Paula and Ricardo. Every day they work, Paula can produce 4 computers or 16 shirts, and Ricardo can produce 6 computers or 12 shirts. What is the most of each good that can be produced each day if each worker fully specializes according to his/her comparative advantage?

A. 4 computers and 12 shirts

B. 5 computers and 14 shirts

C. 6 computers and 16 shirts

D. 8 computers and 22 shirts

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Answer #1

1) Opportunity cost of 1 TV=5 radio for Jen

opportunity cost of 1 TV=3 Radio for Rich

Thus Rich has comparative advantage in TV and Jen in Radio

ans is D

2)Paula can produce 4 computer and 16 shirts

Ricardo can produce 6 computer and 12 shirts

Opportunity cost of 1 computer for Paula=4 shirts

opportunity cost of 1 computer for Ricardo=2 shirts

Ricardo has comparative advantage in Computer and Paula in shirts

Thus production of computer=6 and shirts=16

ans is C

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