Table 3-33
Chris and Tony's Production Opportunities
-Refer to Table 3-33 Chris and Tony both produce tomatoes and pasta sauce. The table shows their possible production per month if both work the same number of 8 hour days. Which of the following prices would result in a mutually advantageous trade between Chris and Tony?
A)1 lb. of tomatoes for 23 jars of sauce
B)1 lb. of tomatoes for 27 jars of sauce
C)1 lb. of tomatoes for 33 jars of sauce
D).Both a and b are correct.

Question

Table 3-33
Chris and Tony's Production Opportunities 
-Refer to Table 3-33 Chris and Tony both produce tomatoes and pasta sauce. The table shows their possible production per month if both work the same number of 8 hour days. Which of the following prices would result in a mutually advantageous trade between Chris and Tony?
A)1 lb. of tomatoes for 23 jars of sauce 
B)1 lb. of tomatoes for 27 jars of sauce 
C)1 lb. of tomatoes for 33 jars of sauce 
D).Both a and b are correct.

Quizplus · Accepted Answer

For it to be a mutually advantageous trade, the opportunity cost of producing tomatoes for each person should be different. 
Using the table, we can see that the opportunity cost of producing 1 lb of tomatoes for Chris is 2 jars of sauce while for Tony it is 3 jars of sauce.

Option A: 1 lb of tomatoes for 23 jars of sauce - The opportunity cost for Chris is 2 jars of sauce, while for Tony it is (1/23)*8 = 0.35 hours which can be used to produce 1.05 jars of sauce. This would be advantageous for both parties as Chris would gain 21 jars of sauce (23-2) while Tony would gain 2.95 jars of sauce (3-1.05) for the same amount of effort.
 
Option B: 1 lb of tomatoes for 27 jars of sauce - The opportunity cost for Chris is 2 jars of sauce, while for Tony it is (1/27)*8 = 0.296 hours which can be used to produce 0.888 jars of sauce. This would again be advantageous for both parties as Chris would gain 25 jars of sauce (27-2) while Tony would gain 2.112 jars of sauce (3-0.888) for the same amount of effort.

Option C: 1 lb of tomatoes for 33 jars of sauce - The opportunity cost for Chris is 2 jars of sauce, while for Tony it is (1/33)*8 = 0.242 hours which can be used to produce 0.726 jars of sauce. This would not be advantageous for Tony as he would only gain 0.726 jars of sauce for the same amount of effort, while Chris would gain 31 jars of sauce (33-2).

Thus, options A and B would both lead to a mutually advantageous trade between Chris and Tony.

Table 3-33 Chris and Tony's Production Opportunities