Tom and Jerry have two tasks to do all day: make dishes and build fences.If Tom spends all day making dishes,he will have make 16 dishes.If he instead devotes his day to building fences,Tom will build 4 fences.If Jerry spends his day making dishes,he will make 14 dishes; if he spends the day building fences,he will build 7 fences.If Jerry decides to specialize in building fences,what are the limits to his terms of trade?
A) Jerry will accept no less than 7 dishes for each fence.
B) Jerry will accept no less than 2 dishes for each fence.
C) Jerry will accept no less than 7 fences for each dishes.
D) Jerry will accept no less than 2 fences for each dishes.

Question

Quizplus · Accepted Answer

Jerry's opportunity cost of producing one fence is 2 dishes (he can make 7 fences or 14 dishes in a day). Therefore, he will not accept a trade that gives him less than 2 dishes for each fence he produces. Thus, option B is the correct answer. Options A, C and D are incorrect as they do not reflect Jerry's opportunity cost or terms of trade.

Tom and Jerry Have Two Tasks to Do All Day