Cassandra and Jim can make either sushi or wine or some combination of both.Each have eight hours to work.In her eight hours Cassandra can make 24 sushi rolls or 8 litres of wine (or some combination, if she splits her time).Jim can make either 16 sushi rolls or 4 litres of wine (or some combination).If the gains from trade are to be realized:
A)Cassandra will specialize in wine and Jim will specialize in producing sushi; the price of a litre of wine must be between 1/4 and 1/3 of a sushi roll.
B)Cassandra will specialize in wine and Jim will specialize in producing sushi; the price of a litre of wine must be between 3 and 4 sushi rolls.
C)Cassandra will specialize in wine and Jim will specialize in producing sushi; the price of a litre of wine must be between 1/4 and 1 sushi roll.
D)Cassandra will specialize in sushi and Jim will specialize in producing wine; the price of a litre of wine must be between 3 and 4 sushi rolls.
E)Cassandra will specialize in wine and Jim will specialize in producing sushi; the price of a litre of wine must be between 2 and 4 sushi rolls.

Question

Quizplus · Accepted Answer

Cassandra has a comparative advantage in wine production because she can produce wine at a rate of 3 sushi rolls per litre (24 sushi rolls / 8 litres of wine), while Jim can only produce at a rate of 4 sushi rolls per litre (16 sushi rolls / 4 litres of wine). Thus, Cassandra should specialize in wine and Jim in sushi. The price of a litre of wine must make trade beneficial for both, meaning it must be more than Cassandra's opportunity cost (3 sushi rolls) but less than Jim's (4 sushi rolls), hence between 3 and 4 sushi rolls.

Cassandra and Jim Can Make Either Sushi or Wine or Some