Using the same amount of time and resources, Tomer can either write 100 lines of code or process 20 reports, and Charlotte can either write 120 lines of code or process 20 reports.

If Charlotte and Tomer specialize and trade, who should produce which good?

Choose 1 answer:
Charlotte should specialize in writing lines of code, Tomer should specialize in reports
(B) There is no opportunity for gains from trade because neither person has a comparative advantage in producing either good.
INCORRECT
Charlotte should specialize in reports, Tomer should specialize in writing lines of code.
Each agent should specialize in what they have a comparative advantage at producing. Charlotte doesn't have a comparative advantage in reports and Tomer doesn't have a comparative advantage in writing lines of code.
(D) Charlotte should specialize in writing lines of code but nobody should specialize in processing reports.
(E)
There is no opportunity for specialization because they both have an absolute advantage in producing one good.
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Terms of trade and the gains from trade

Question

Using the same amount of time and resources, Tomer can either write 100 lines of code or process 20 reports, and Charlotte can either write 120 lines of code or process 20 reports.

If Charlotte and Tomer specialize and trade, who should produce which good?

Choose 1 answer:
Charlotte should specialize in writing lines of code, Tomer should specialize in reports
(B) There is no opportunity for gains from trade because neither person has a comparative advantage in producing either good.
INCORRECT
Charlotte should specialize in reports, Tomer should specialize in writing lines of code.
Each agent should specialize in what they have a comparative advantage at producing. Charlotte doesn't have a comparative advantage in reports and Tomer doesn't have a comparative advantage in writing lines of code.
(D) Charlotte should specialize in writing lines of code but nobody should specialize in processing reports.
(E)
There is no opportunity for specialization because they both have an absolute advantage in producing one good.
Related content
Terms of trade and the gains from trade

Accepted Answer

***A*** ∻Key Concept∻ ⚹Comparative Advantage⚹ ∻Explanation∻ ⚹Comparative advantage occurs when an individual can produce a good at a lower opportunity cost than another. Charlotte has a lower opportunity cost for producing lines of code, and Tomer for processing reports, so they should specialize accordingly.⚹◊What is the formula for calculating comparative advantage in production?⍭ Generate me a similar question◊

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