Suppose it takes Jean four hours to catch 10 fish and one hour to collect one kilogram of mushrooms. It takes Lee four hours to catch 10 fish and 30 minutes to collect one kilogram of mushrooms. It is not possible for Jean and Lee to gain from specialisation and trade.

Question

Quizplus · Accepted Answer

To find out who has a comparative advantage in a certain activity, we need to calculate their opportunity cost. For Jean, the opportunity cost of catching 1 fish is 0.4 hours (4 hours/10 fish), and the opportunity cost of collecting 1 kg of mushroom is 4 hours. For Lee, the opportunity cost of catching 1 fish is 0.4 hours (4 hours/10 fish), and the opportunity cost of collecting 1 kg of mushroom is 0.5 hours (0.5 hours/1 kg). Therefore, Lee has a comparative advantage in collecting mushrooms, while Jean has a comparative advantage in fishing. They can gain from specialization and trade by focusing on their respective comparative advantages and trading with each other. Therefore, the answer is B, False.

Suppose It Takes Jean Four Hours to Catch 10 Fish