Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. Suppose Smith and Jones begin by producing 0 computers and 220 calculators per hour. If they wish to produce 2 computers and 200 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 0 computers and 220 calculators per hour. If they wish to produce 2 computers and 200 calculators per hour efficiently, then Smith should spend ______, and Jones should spend ______.

Quizplus · Accepted Answer

Smith has a comparative advantage in producing computers, so he should make the 2 computers. It takes him 6 minutes to make a computer, so making 2 computers will take him 12 minutes. He can use the remaining 48 minutes to make 80 calculators (80 = (48/60) F1F1F1S1F1F1F10 100). Jones should spend the entire hour making the remaining 120 calculators.

Smith and Jones Comprise a Two-Person Economy