These figures illustrate the production possibilities available to Barney and Betty with 8 hours of labor in their baker
Figure 3-4

-Refer to Figure 3-4.Initially,Barney is spending one-half of his time making pies and the other one-half of his time making bread,and Betty is doing the same.Relative to this initial situation,Barney and Betty could specialize according to the principle of comparative advantage,and both could benefit from this new arrangement,provided they agree that one loaf of bread will trade for somewhere between
A)1/2 pie and 3/4 pie.
B)3/4 pie and 1 pie.
C)3/4 pie and 2 pies.
D)1 pie and 1 1/2 pies.

Question

These figures illustrate the production possibilities available to Barney and Betty with 8 hours of labor in their baker
Figure 3-4
 
-Refer to Figure 3-4.Initially,Barney is spending one-half of his time making pies and the other one-half of his time making bread,and Betty is doing the same.Relative to this initial situation,Barney and Betty could specialize according to the principle of comparative advantage,and both could benefit from this new arrangement,provided they agree that one loaf of bread will trade for somewhere between
A)1/2 pie and 3/4 pie. 
B)3/4 pie and 1 pie. 
C)3/4 pie and 2 pies. 
D)1 pie and 1 1/2 pies.

Quizplus · Accepted Answer

The principle of comparative advantage suggests that both parties can benefit from trade if they specialize in producing goods for which they have a lower opportunity cost. The trade ratio must fall between their respective opportunity costs for both to benefit.

These Figures Illustrate the Production Possibilities Available to Barney and Betty