Graph 3-2 These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour.
-According to Graph 3-2:
A)Amy should specialise in doughnuts, and Jim should specialise in coffee
B)Amy should specialise in coffee, and Jim should specialise in doughnuts
C)Amy should specialise in coffee, and Jim should specialise in neither goods
D)Amy should specialise in both goods, and Jim should specialise in coffee

Question

Graph 3-2  These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour.
-According to Graph 3-2:
A)Amy should specialise in doughnuts, and Jim should specialise in coffee 
B)Amy should specialise in coffee, and Jim should specialise in doughnuts 
C)Amy should specialise in coffee, and Jim should specialise in neither goods 
D)Amy should specialise in both goods, and Jim should specialise in coffee

Quizplus · Accepted Answer

The graph shows that Amy has a comparative advantage in producing coffee (line is steeper for coffee) while Jim has a comparative advantage in producing doughnuts (line is steeper for doughnuts). Therefore, Amy should specialise in producing coffee while Jim should specialise in producing doughnuts to maximise their output.

Graph 3-2 These Figures Illustrate the Production Possibilities Available