Question

5 False The law of comparative advantage says that a. 3. the individual with the lowest opportunity cost of producing a particular good should produce it comparative advantage exists only when one person has an absolute advantage in the production of two goods whoever has a comparative advantage in producing a good also has an absolute adva in producing that good b. c. d. whoever has an absolute advantage in producing a good also has a comparative advantag in producing that good gains from trade are possible only when one person has the comparative advantage in producing both goods e. John can clean the house in 3 hours and paint the basement in 3 hours, whereas Mike can c hours and paint the basement in 2 hours. Which of the following statements are correct? a. b. 4. John has absolute advantage in cleaning the house John has absolute advantage in painting the basement. c. Mike has absolute advantage in cleaning the house d. Mike has absolute advantage in both cleaning the house and painting the basement e. John has absolute advantage in both cleaning the house and painting the basement . Because of specialization and comparative advantage, most people a. consume only what they produce themselves b. consume the products produced by their family and friends c. consume the products of many other specialists d. do not use money as a medium of exchange e. share whatever they produce

Answer 1

3) The law of comparative advantage says that , the individual with the lowest opportunity cost of producing a particular good should produce it. If this happens, then both the person will eventually have a larger basket of goods to consume and they can then trade their products with each other.This will make both the individuals better off. So option A is the correct answer.

4)Full information is not provided. Hours required by Mike to clean is not given.

5)Because of specialization and comparative advantage, most people share whatever they produce. In the case of specialization and comparative advantage, individuals only produce the goods in which they have a lower opportunity cost than the other individual. This helps them to produce more of goods. After specialization, the individuals share their produced product with each. This makes the individuals better off.