Question

AQ. (20-15) /(20+15) AP 60000-$1600) i 40000 4 Succ) 5 Gains from trade: computing comparative advantage and op- portunity cost (5 points) Jose and Rashid are roommates and often cook together. Jose takes 40 minutes to make a sandwich and 20 minutes to make a portion of salad. Rashid takes 60 minutes to make a sandwich and 40 minutes to make a portion of salad. • What is each roommate's opportunity cost of making sandwich? Who has the absolute advantage in making a sandwich? Who has the comparative advantage in making a sandwich? Jose has both an absolute Jose advantage and comparative advantange in maring a sandūnich. Sandoy salad 40. 20 min 60 min 40 min opportunity cost a salads ² salads Rashid • If Jose and Rashid trade their meals, who should make sandwich and who should make salad i.e. trade away sandwich in exchange for salad)? from wor causing to clercase long run the men will return for women worvers Long ron. me long run

Answer 1

Let us first make Jose & Rashica's production tabler In 120 mins Jose can make 120 = 3 Sandwich Jose can make 120 = 6 salad . 40 20 60 I 40 1 Rashid can make 120 = 2 sandwich. Rashid can make 120 = 3 salad . opportunity cast of making Sandwich - Jose - 6 = [2 salad Rashid = 3 = 11.5 salad Absolute advantage in sandwich = [Jose 1 (372) CA in sandwich & Rashid (lower off. cost 1.522) Rashid should make Sandwich 3 one who has Jose should make salad CA or lower opportunity cost - EV M 2 volle