Question

Julia can fix a meal in 1 hour, and her opportunity cost of one hour is $50. Jacque can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is$20. Will both Julia and Jacque be better off if she pays him $45 per meal to fix her meals? Explain.

Answer 1

Julia can fix a meal in 1 hour, and her opportunity cost of one hour is $50.

Jacque can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is $20.

In one hour, Julia can make a meal OR make $50; Jacque can make 0.5 meals or make $20.

Will both Julia and Jacque be better off if she pays him $45 per meal to fix her meals? Explain.

YES. Because Jacque can make - at most - $40 per two hours ($20/hour x 2 hours) or one meal for two hours (1 meal). He will make $5 net gain in thetransaction.
Meanwhile, Julia can make $50 in an hour OR make a meal. If she chooses to make $50 in that hour, she can just pay $45 to Jacque and still have her meal -and $5 left over!

Basically, each will have a net benefit of $5.