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Principles of Economics, 7th Editi...

7th Edition
N. Gregory Mankiw
ISBN: 9781285165875

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BuyFindarrow_forward

Principles of Economics, 7th Editi...

7th Edition
N. Gregory Mankiw
ISBN: 9781285165875
Textbook Problem

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

  1. a. Mark should do more of the cooking based on his comparative advantage.
  2. b. Mark should do more of the washing based on his comparative advantage.
  3. c. Mark should do more of the washing based on his absolute advantage.
  4. 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 Mark 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 Mark 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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