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_________ .
A) oil; tires
B) tires; oil
C) oil; oil
D) tires; tires

Question

Quizplus · Accepted Answer

Sue is relatively better at changing tires because she can change the tires on 20 cars in one day compared to her ability to change the oil on 20 cars in one day. Similarly, Fred is relatively better at changing oil because he can change the oil on 20 cars in one day compared to his ability to change the tires on 10 cars in one day. Therefore, if Sue changes the tires and Fred changes the oil, they can produce more total cars serviced in one day than if they each tried to do both tasks. This is the concept of comparative advantage and gains from trade.

In One Day, Sue Can Change the Oil on 20