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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Kayla can cook dinner in 30 minutes and wash the laundry in 20 minutes. Her roommate takes half as long to do each task. How should the roommates allocate the work?

a. Kayla should do more of the cooking based on her comparative advantage.

b. Kayla should do more of the washing based on her comparative advantage.

c. Kayla should do more of the washing based on her absolute advantage.

d. There are no gains from trade in this situation.

To determine

The gain from a trade based on comparative advantage.

Explanation

Option (d)

The opportunity cost for Kayla in cooking dinner is 1.5 (30/20) units of washing laundry and for her roommate it is the same 1.5 (15/10) units of washing laundry. Similarly, the opportunity cost of washing laundry also remains the same for Kayla and her roommate; that is, 0.67 ((20/30)or (10/15)) of cooking dinner. This implies that no one has the comparative advantage in cooking dinner or washing laundry

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