Question: Suppose that Tessa buys a new machine for making jackets that enables her to make 20 jackets an hour. (She can still make only 80

Suppose that Tessa buys a new machine for making jackets that enables her to make 20 jackets an hour. (She can still make only 80 caps per hour.)
a. Who now has a comparative advantage in producing jackets?
b. Can Sue and Tessa still gain from trade?
c. Would Sue and Tessa still be willing to trade 1 jacket for 15 caps? Explain your answer.

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a Sue forgoes 40 caps to produce 4 jackets so Sues opportunity cost of producing one jac... View full answer

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