In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue and Fred can gain from trade if Sue changes the and Fred changes the .

Question

Quizplus · Accepted Answer

Sue has a comparative advantage in changing tires because she can change 20, which is more than Fred can change in one day. Fred has a comparative advantage in changing oil because he can change 20, which is more than Sue can change in one day. Therefore, it is most efficient for Sue to change the tires and for Fred to change the oil, resulting in a higher quantity of both services being produced overall. This is an example of gains from trade through specialization and comparative advantage.

In One Day, Sue Can Change the Oil on 20