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Fact 2.3.3
In one hour,Sue can produce 50 caps or 10 jackets,and Tessa can produce 70 caps or 7 jackets.
-Refer to Fact 2.3.3.________ has a comparative advantage in producing caps.If Sue and Tessa each specialize in producing the good in which they have a comparative advantage and trade 1 jacket for 7 caps,________.
A)Sue;Tessa gains but Sue loses
B)Tessa;Sue loses but Tessa gains
C)Sue;both Sue and Tessa gain
D)Tessa;both Sue and Tessa gain
E)Tessa;Tessa loses but Sue gains

Question

Quizplus · Accepted Answer

Tessa has a comparative advantage in producing caps because she can produce more caps per hour than Sue (70 vs. 50). When they specialize and trade 1 jacket for 7 caps, both benefit from trade due to the principle of comparative advantage, allowing them to consume beyond their production possibilities.

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