Question

Suppose there are only two goods produced in an economy: phones and meals. Maria is adept at assembling electronics but has poor skills at preparing food. Mike is an accomplished chef but is not very skilled at assembling electronics.

Currently Mike and Maria each work independently, and they each produce both meals and phones. However, they are considering trading some of their respective output with each other, but only if that would allow each person to become more propserous.

Which statement is not true?

Mike should produce more food and fewer phones, and Maria should produce more phones and fewer meals.

Customers will gain if Mike and Maria decide to specialize in what they do best and trade their output.

Mike and Maria would gain by using their time making only the one good that they are best at producing.

Mike and Maria will both gain only if they trade the same number of phones for the same number of meals.

Answer 1

Mike and Maria will both gain only if they trade the same number of phones for the same number of meals.

(All the other statements are true. However, they will gain from trading phones and meals with each other but the number of phones that should be traded for food depends on the opportunity cost of producing those goods. Trading equal number of both goods may not necessarily make them better off.)