Author Question: Beth can paint 2 T-shirts in an hour while her brother can paint 1 T-shirt in an hour. However, her ... (Read 76 times)

HCHenry · **on:** Jun 30, 2018

Beth can paint 2 T-shirts in an hour while her brother can paint 1 T-shirt in an hour. However, her brother can paint 2 walls in an hour while she can paint only one. Who should specialize in which activity and why?

What will be an ideal response?

Question 2

The formula of the equation of exchange is

A) MS = VPY. B) MSV = PY. C) MS/P = Y. D) MS = Y.

choc0chan · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

The opportunity cost of painting a T-shirt for Beth is 1/2 a wall and the opportunity cost of painting a T-shirt for her brother is 2/1 or 2 walls. Therefore, Beth has a comparative advantage in painting T-shirts and should specialize in it. The opportunity cost of painting a wall for Beth is and the opportunity cost of painting a wall for her brother is 1/2 a T-shirt. Therefore, her brother has a comparative advantage in painting walls and should specialize in painting walls.

Answer to Question 2

B