a) Draw the Production Possibilities Frontier for Dennis and for Janice. Before trade, who (if anyone) has the absolute advantage in the production of laundry and meals? b) Fill in the following chart. Based on your calculations, who has the comparative advantage in laundry and who has the comparative advantage in meals. Laundry Meals Opportunity Opportunity Cost of Cost of Laundry Meals Dennis 20 Janice 20 30 20 c) Assuming that before specialization and trade both Dennis and Janice spend half of their time on each task, what is the total laundry and meal production for the household. Assuming that they specialize and trade, what is the total laundry and meal production for the household? What are the gains from trade?

a) Draw the Production Possibilities Frontier for Dennis and for Janice. Before trade, who (if anyone) has the absolute advantage in the production of laundry and meals? b) Fill in the following chart. Based on your calculations, who has the comparative advantage in laundry and who has the comparative advantage in meals. Laundry Meals Opportunity Opportunity Cost of Cost of Laundry Meals Dennis 20 Janice 20 30 20 c) Assuming that before specialization and trade both Dennis and Janice spend half of their time on each task, what is the total laundry and meal production for the household. Assuming that they specialize and trade, what is the total laundry and meal production for the household? What are the gains from trade?

Name: Problem 2: Comparative Advantage and Gains from TradeSuppose that Den
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Description: Problem 2: Comparative Advantage and Gains from TradeSuppose that Dennis and Janice are roommates. If Dennis puts all his effort into doinglaundry, he can wash 20 loads per week. if he puts all his effort into cooking meals, he canproduce 30 meals.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

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Problem 2: Comparative Advantage and Gains from Trade
Suppose that Dennis and Janice are roommates. If Dennis puts all his effort into doing
laundry, he can wash 20 loads per week. if he puts all his effort into cooking meals, he can
produce 30 meals. If Janice puts all her effort into doing laundry, she can wash 20 loads
per week. If she puts all her effort into cooking meals, she can produce 20 meals.
a) Draw the Production Possibilities Frontier for Dennis and for Janice. Before trade, who
(if anyone) has the absolute advantage in the production of laundry and meals?
b) Fill in the following chart. Based on your calculations, who has the comparative
advantage in laundry and who has the comparative advantage in meals.
Laundry Meals Opportunity Opportunity
Cost of
Cost of
Laundry
Meals
Dennis 20
Janice 20
30
20
c) Assuming that before specialization and trade both Dennis and Janice spend half of their
time on each task, what is the total laundry and meal production for the household.
Assuming that they specialize and trade, what is the total laundry and meal production
for the household? What are the gains from trade?

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