2 - Comparative Advantage

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. What is the opportunity cost to Cathy of making a cake?

2/3 pies

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct? A.Tracy should specialize in sandwiches and smoothies. B. Dan should specialize in smoothies, and Tracy should specialize in sandwiches. C. Dan should specialize in sandwiches, and Tracy should specialize in smoothies. D. Dan should specialize in both sandwiches and smoothies.

c

Which of the following is NOT a reason why there are gains to specialization? a. It eliminates many of the costs of switching from one task to another. b. It further improves skills through experience and practice. c. It increases the amount productive resources in the economy. d. It allows individuals to concentrate on the activities in which they have a comparative advantage

c

Refer to the accompanying table. Based on their comparative advantage, Martha should specialize in making _______ while Julia should specialize in making _______. Martha 60 minutes pie 80 minutes cake Julia 50 minutes pie 60 minutes cake

pies; cakes

Outsourcing is a term increasingly used to refer to the act of:

replacing relatively expensive American workers with low-wage workers overseas.

Refer to the accompanying figure. If this economy were currently operating at point D, then in order to make more movies:

the first productive resources to switch to making movies should be those with the highest opportunity cost of making milk.