Suppose that Lo and Manuel can either run errands or wash dishes. Their maximum outputs per hour are listed in the following table. Given the same quantity of resources, at what terms of trade relative price ratio) could they specialize and trade so that both consume outside their own production possibilities frontiers PPFs)? $$\begin{array} { l l l l l }
\hline & \begin{array} { l }
\text { Erran } \
\text { ds } \
\text { Run }
\end{array} & \begin{array} { l }
\text { Opportunity } \
\text { Cost } \
\text { of } 1 \text { Errand }
\end{array} & \begin{array} { l }
\text { Dishes } \
\text { Washe } \
\text { d }
\end{array} & \begin{array} { l }
\text { Opportunity Cost } \
\text { of } 1 \text { Dish Washed }
\end{array} \
\hline \text { Lo } & 1 & 60 \text { dishes } & 60 & 1 / 60 \text { errand } \
\text { Marue } & 3 & 15 \text { dishes } & 45 & 1 / 15 \text { errand } \
1 & & & & \
\hline
\end{array}$$
A) 1 errand run per 75 dishes washed
B) 1 errand run per 30 dishes washed
C) 1 errand run per 12 dishes washed
D) 1 errand run per 10 dishes washed
E) 1 errand run per 6 dishes washed

Question

Suppose that Lo and Manuel can either run errands or wash dishes. Their maximum outputs per hour are listed in the following table. Given the same quantity of resources, at what terms of trade relative price ratio) could they specialize and trade so that both consume outside their own production possibilities frontiers PPFs)? $$\begin{array} { l l l l l } 
\hline & \begin{array} { l } 
\text { Erran } \
\text { ds } \
\text { Run }
\end{array} & \begin{array} { l } 
\text { Opportunity } \
\text { Cost } \
\text { of } 1 \text { Errand }
\end{array} & \begin{array} { l } 
\text { Dishes } \
\text { Washe } \
\text { d }
\end{array} & \begin{array} { l } 
\text { Opportunity Cost } \
\text { of } 1 \text { Dish Washed }
\end{array} \
\hline \text { Lo } & 1 & 60 \text { dishes } & 60 & 1 / 60 \text { errand } \
\text { Marue } & 3 & 15 \text { dishes } & 45 & 1 / 15 \text { errand } \
1 & & & & \
\hline
\end{array}$$
A) 1 errand run per 75 dishes washed
B) 1 errand run per 30 dishes washed
C) 1 errand run per 12 dishes washed
D) 1 errand run per 10 dishes washed
E) 1 errand run per 6 dishes washed

Quizplus · Accepted Answer

Lo's opportunity cost of running 1 errand is 60 dishes, and Manuel's opportunity cost of running 1 errand is 15 dishes. For both to benefit, the terms of trade must be between their opportunity costs. 1 errand per 30 dishes washed is between Lo's 60 dishes and Manuel's 15 dishes, allowing both to trade and consume outside their PPFs.

Suppose That Lo and Manuel Can Either Run Errands or Wash