Question

The following data represent the production possibilities of two people in solving math and economics problems. If they devote their total effort and time to math, A can solve 10 math problems and B can solve 10 math problems. If they devote their total effort and time to economics, A can solve 10 economics problems and B 5 economics problems.


a. Who has the absolute advantage?
b. Who has the comparative advantage?
c. Assume that each will be self-sufficient and devote half their resources to math and half to economics. The outcome follows.


Now assume they specialize according to comparative advantage. How much math and economics will they produce together? What are the gains fromtrade?


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  • CreatedSeptember 27, 2014
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