Given that Sandy can produce 10 economics reports or make 2 sales calls and Tim can produce 2 economics reports or make 1 sales call,we can conclude that
A)Sandy should specialize in economics reports, and Tim should specialize in sales calls.
B)Sandy should produce both economics reports and sales calls since she cannot possibly gain from trade with Tim.
C)Tim should specialize in producing economics reports, and Sandy should specialize in producing sales calls.
D)Tim should produce both economics reports and sales calls.

Question

Quizplus · Accepted Answer

Sandy has a comparative advantage in producing economics reports because she can produce 10 reports compared to Tim's production of only 2 reports. On the other hand, Tim has a comparative advantage in making sales calls because he can make 1 call compared to Sandy's production of only 0.2 calls (2/10 reports). Therefore, it is efficient for Sandy to specialize in producing economics reports while Tim specializes in making sales calls. By doing this, they can trade their products and both gain from trade.

Given That Sandy Can Produce 10 Economics Reports or Make