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. Which of the following statements is correct?
A. Lewis should specialize in pies, and Cathy should specialize in cakes.
B. Cathy should specialize in pies, and Lewis should specialize in cakes.
C. Cathy should specialize in both pies and cakes.
D. There are no gains from specialization and trade.
Answer: A
You might also like to view...
The country of Epsilon has continuous strong economic growth and a steady price level. This situation is most likely the result of aggregate demand growing ________ aggregate supply
A) at the same pace as long-run B) slower than long-run C) slower than short-run D) faster than long-run
By producing less, a firm can reduce
A) its fixed costs and its variable costs. B) its fixed costs but not its variable costs. C) its variable costs but not its fixed costs. D) neither its variable costs nor its fixed costs.
In which of the following situations would a positive externality most likely be involved?
A. Shawn is sitting at home one day when she gets a telephone call, informing her that she has won $10,000 in a contest she entered three months ago. B. There are eight houses in the neighborhood where Rodney lives. Rodney likes nice-looking yards, and last week his neighbors began to beautify their yards. C. Willy needs eight hours of sleep each night to feel good. Last night he got eight hours of sleep. D. Patrick received an A on a biology exam. He is feeling better about his chances of getting admitted to medical school.
Two goods are complementary if:
a. they are part of the basic food group. b. each performs the same basic task. c. the cross elasticity of demand is positive. d. they are used together. e. the income elasticity of demand is negative.