Question

In: Economics

Priti and Dan each produce strong cocktails and yummy cookies. Priti takes less time than Dan...

Priti and Dan each produce strong cocktails and yummy cookies. Priti takes less time than Dan to mix up a cocktail and to bake a batch of cookies. Thus, Priti would rather produce on her own because she cannot gain from trade with Dan. True or False with explanation.

Solutions

Expert Solution

** Please like if answer was helpful. It would mean a lot!**

False.

(Here Priti has absolute advantage in both cocktails and cookies. But from Ricardo's comparative advantage theory we know that they can work together even in this circumstance. According to the theory, Priti and Dan should make the product which has lesser opportunity cost. If Priti can make 10 cocktails or 12 cookie in an hour, while Dan can make 8 cocktails or 4cookie in an hour, then Priti should specialise in cookies while Dan should specialise in cocktails as per the lower opportunity cost.

Say Priti goes ahead and makes 12 cookies then goes to Dan for a deal. Now for Dan every cookie is worth 2 cocktails (i.e 8cookies/4cocktails). To earn from the trade Dani quotes a lesser value of around 1.5 cocktails per cookie. Priti agrees and now gets 18 cocktails which is greater than the 10 she would have produced alone in an hour, whereas Dan gets cookies at a cheaper cost than he could have produced himself.)


Related Solutions

McDonald’s makes the claim that it takes 90 seconds or less from the time a car...
McDonald’s makes the claim that it takes 90 seconds or less from the time a car stops at the order point to delivery of an order through the window. How can McDonald’s substantiate this claim when drive-thru times vary? How does McDonald’s quantify the uncertainty surrounding its estimate of drive-thru service time? How can the variability in drive-thru service times be quantified? Why is it important to understand variability? Why is it important for McDonald’s to effectively communicate its statistical...
For each of the following, fill in the blanks with "Less than", "Greater than", or "Equal...
For each of the following, fill in the blanks with "Less than", "Greater than", or "Equal to" *) A gas flows through a one-inlet, one-exit control volume operating at steady state with no internal irreversibilities, Qcv = 0. Heat transfer at a rate Qcv takes place only at a location on the boundary where the temperature is Tb. The specific entropy of the gas at the exit is _____ than the specific entropy of the gas at the inlet. *)...
When consumption expenditure is less than-----, saving takes place and --- rises. Fill in the blanks....
When consumption expenditure is less than-----, saving takes place and --- rises. Fill in the blanks. Wealth; net income Net income; wealth Net income; depreciation Investment expenditure; wealth
A car manufacturer has determined it takes an average time of 54 minutes to produce a...
A car manufacturer has determined it takes an average time of 54 minutes to produce a car. The population standard deviation is assumed to be 4 minutes. The company pays a bonus to the workers for every car produced in 46 minutes or less. Assuming that the production time is normally distributed, answer the following questions. Let X = production time of a randomly selected car. Round all probabilities to four decimal places and times to two decimal places. a)...
A car manufacturer has determined it takes an average time of 54 minutes to produce a...
A car manufacturer has determined it takes an average time of 54 minutes to produce a car. The population standard deviation is assumed to be 4 minutes. The company pays a bonus to the workers for every car produced in 46 minutes or less. Assuming that the production time is normally distributed, answer the following questions. Let X = production time of a randomly selected car. (Round all probabilities to four decimals and times to two decimals) a) What is...
When a machine is properly calibrated, it takes an average time of 19.0 seconds to produce...
When a machine is properly calibrated, it takes an average time of 19.0 seconds to produce a widget, with a standard deviation of 2.8 seconds. For a simple random sample of n = 36 widgets, the sample mean production time is found to be x-bar = 20.2 seconds. If the machine was properly calibrated, what is the probability that the mean for this sample would be 20.2 seconds or more? Now that you know the probability of this sample mean...
“IBM should never sell its product for less than it costs to produce.” If “costs to...
“IBM should never sell its product for less than it costs to produce.” If “costs to produce” is interpreted as average total cost, is this correct? If it is interpreted as average variable cost, is it correct? If it is marginal cost, is the statement correct?
For each, indicate whether the first item is (greater than, equal to, less than) the second...
For each, indicate whether the first item is (greater than, equal to, less than) the second item oxygen content in the pulmonary veins      ___________       oxygen content in the carotid arteries Answer 1Choose...greater thanequal toless than maximum pressure in the aorta ___________     maximum pressure in the left atrium   Answer 2Choose...greater thanequal toless than blood flow through the lungs ____________ blood flow through the kidneys Answer 3Choose...greater thanequal toless than flow of blood through a dilated vessel _____________ flow of blood through...
Write a paragraph for each question no less than 4 sentences, and no more than 10...
Write a paragraph for each question no less than 4 sentences, and no more than 10 sentences. Why is responsibility retained by nurses when tasks are delegated? What are the five individual power sources? Provide an example of each. Why is positive reinforcement such a powerful motivator? How does leadership differ from power? Can a leader be effective without power?
Someone gets more than 8 hours of sleep 50 percent of the time, less than 3...
Someone gets more than 8 hours of sleep 50 percent of the time, less than 3 hours 30 percent of the time, and 3-8 hours (inclusive) 20 percent of the time. when they sleep more than 8 hours, forty percent of the time they score really well. when they get less than 3 hours, 20 percent of the time they score really well. when they get 3-8 hours inclusive they score really well 40 percent of the time. what is...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT