chapter 6: gains from trade

12 minutes, sarah can fold all the towels and and clean a room in 9 minutes. Landon can fold towels in 10 minutes or clean a room in 15 mins. Sarahs opportunity costs of folding towels is:

1.33 rooms

cornell can type reports faster and more accurately then alice, so cornell has an:

absolute advantage in typing reports

which benefit could a company gain from using internal markets?

better allocation of its resources and more accurate predictions

When trade is based on comparative advantage...

both trading partners end up better off

you recently renovated a large historic building which you are the owner and operator. you have noticed that the quantity of hotel bookings vary. you now want to forecast when to expect the most bookings, the most accurate forecast would likely result if you:

design an internal prediction market for employees to indicate their expectations.

Chantelle grows tomatoes and sells them at the farmer's market. Because the price of tomatoes rises, she is encouraged to grow and sell more. This is an example of price functioning as

incentive

price is functioning as a message when it:

is a line of communication between buyers and sellers in a market

during covid, global supply chain issues cause the supply of new cars to shift left. Which role did price play in the new car market?

message to potential buyers that the marginal cost of manufacturing new cars is rising.

you pay a plumber to install a new dishwasher in your home. which statement is false?

only the plumber experiences gains from trade because they received money

As long as people have different ________, everyone has a comparative advantage in something.

opportunity costs

A prediction market is a market where:

payoffs are linked to whether an uncertain event occurs.

when a country's production mix becomes more specialized due to increased international trade based on comparative advantage:

some industries in the country will shrink and possibly disappear

When a manager uses comparative advantage to assign tasks in a workplace, then each:

task is assigned to the worker with the lowest opportunity cost for performing the task

why does apple design the iphone in calu but assemble in china?

the us has a comparative advantage un iPhone design

economists generally believe that a person should specialize in the production of a good or service if:

they can produce the product while forgoing fewer alternative products than any other person

on camping trips, katie is much faster than her husband at putting up tents and starting a fire. who should do each task to maximize their time at the campfire?

they should first each focus on that task in which they have CA and when they are done, they can help each other