Sia
Question
Macroeconomics
Posted 9 months ago
Using the same amount of time and resources, Kim can write either 10 articles or complete 5 worksheets and Leah can either write 3 articles or complete 9 worksheets.
If Kim and Leah specialize and trade, who should specialize in each good?
Choose 1 answer:
(A) Kim should specialize in writing articles, Leah should specialize in worksheets
(B) There is no opportunity for specialization because they both have an absolute advantage in producing one good.
(C) There is no opportunity for gains from trade because neither person has a comparative advantage in producing either good.
(D) Kim should specialize in worksheets, Leah should specialize in writing articles.
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Answer from Sia
Posted 9 months ago
A
Key Concept
Comparative Advantage
Explanation
Kim has a comparative advantage in writing articles because she gives up fewer worksheets to produce an additional article than Leah does (Kim's opportunity cost is 0.5 worksheets per article, while Leah's is 3 worksheets per article). Leah has a comparative advantage in completing worksheets because she gives up fewer articles to produce an additional worksheet than Kim does (Leah's opportunity cost is 1/3 of an article per worksheet, while Kim's is 2 articles per worksheet). Therefore, Kim should specialize in writing articles and Leah should specialize in worksheets to maximize gains from trade.
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