Alex and Henry are completing group work for class. The input table below gives the time that it takes Henry and Alex to complete their homework assignments in hours.
\begin{tabular}{lll}
& Time to complete Worksheets & Time to complete Essays \
\hline Henry & 1 hour & 2 hours \
Alex & 1 hour & 3 hours
\end{tabular}

Assuming Alex and Henry decide to specialize and trade essays and worksheets with one another, what would be a terms of trade or exchange price that would satisfy both of them?

Choose 1 answer:
(A) Any price where an essay costs less than 2 worksheets
(B) Any price where an essay costs between 2 and 3 worksheets
(c) Any price where an essay costs more than 3 worksheets
(D) We cannot determine a mutually agreeable trading price
(E) Any trading price is possible

Question

Alex and Henry are completing group work for class. The input table below gives the time that it takes Henry and Alex to complete their homework assignments in hours.
\begin{tabular}{lll} 
& Time to complete Worksheets & Time to complete Essays \
\hline Henry & 1 hour & 2 hours \
Alex & 1 hour & 3 hours
\end{tabular}

Assuming Alex and Henry decide to specialize and trade essays and worksheets with one another, what would be a terms of trade or exchange price that would satisfy both of them?

Choose 1 answer:
(A) Any price where an essay costs less than 2 worksheets
(B) Any price where an essay costs between 2 and 3 worksheets
(c) Any price where an essay costs more than 3 worksheets
(D) We cannot determine a mutually agreeable trading price
(E) Any trading price is possible

Accepted Answer

∻Solution∻ ‖ a ⋮ Comparative Advantage: Comparative advantage occurs when a person can produce a good at a lower opportunity cost than another person. ‖ ‖ b ⋮ Henry's Opportunity Cost: Henry takes 1 hour to complete a worksheet and 2 hours to complete an essay. Therefore, the opportunity cost of 1 essay for Henry is 2 worksheets. ‖ ‖ c ⋮ Alex's Opportunity Cost: Alex takes 1 hour to complete a worksheet and 3 hours to complete an essay. Therefore, the opportunity cost of 1 essay for Alex is 3 worksheets. ‖ ‖ d ⋮ Terms of Trade: For both to benefit from trade, the terms of trade must lie between their opportunity costs. Hence, the price of 1 essay should be between 2 and 3 worksheets. ‖ ∻Answer∻ ⚹ (B) Any price where an essay costs between 2 and 3 worksheets ⚹ ∻Key Concept∻ ⚹ Comparative Advantage ⚹ ∻Explanation∻ ⚹ Comparative advantage is the ability to produce a good at a lower opportunity cost. In this scenario, Henry and Alex should trade at a price where the opportunity cost of producing an essay is between 2 and 3 worksheets, benefiting both parties. ⚹◊What impact would specialization and trade between Alex and Henry have on their overall productivity and efficiency in⍭ Generate me a similar question◊

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