The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.Table 2.4

-Bob and Bill can make 16 toys each if they devote 8 working hours in a day. Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day. When these two individuals engage in trade, it would be advantageous for both if:

Question

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.Table 2.4
 
-Bob and Bill can make 16 toys each if they devote 8 working hours in a day. Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day. When these two individuals engage in trade, it would be advantageous for both if:

Quizplus · Accepted Answer

According to the principle of comparative advantage, a producer should specialize in the production of the good in which they have a lower opportunity cost. In this case, Bob's opportunity cost of producing toys is 0.5 cars (since he can produce 16 toys or repair 4 cars in 8 hours), while Bill's opportunity cost of producing toys is 2 cars (since he can produce 16 toys or repair 2 cars in 8 hours). Therefore, Bob has a lower opportunity cost of producing toys and should specialize in the production of toys. Similarly, Bill has a lower opportunity cost of repairing cars and should specialize in car repairing. By specializing in these goods, they can both produce more of both goods, resulting in higher total output and efficiency.

The Table Given Below Represents the Output Per Hour of Cookies