Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. Suppose Smith and Jones begin by producing 16 computers and 0 calculators per hour. If they wish to produce 14 computers and 40 calculators per hour efficiently, then Smith should spend ______, and Jones should spend ______.

Question

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below.  Suppose Smith and Jones begin by producing 16 computers and 0 calculators per hour. If they wish to produce 14 computers and 40 calculators per hour efficiently, then Smith should spend ______, and Jones should spend ______.

Quizplus · Accepted Answer

Jones has a comparative advantage in producing calculators, so he should make all 40 calculators. He can make 2 calculators per minute, so this will take him 20 minutes. He can use the remaining 40 minutes to make 4 computers (since it takes him 10 minutes to make a computer). Smith should spend the whole hour making the 10 other computers.

Smith and Jones Comprise a Two-Person Economy