This Question: 1 pt 7 of 38 (2 complete) In one hour, Sue can produce 40 caps or

Question

This Question: 1 pt 7 of 38 (2 complete) In one hour, Sue can produce 40 caps or 4 jackets and Tessa can produce 80 caps or 4 jackets. Sue's opportunity cost of producing a cap is jackets and Tessa's opportunity cost of producing a cap is jackets has a comparative advantage in producing caps. If Sue and Tessa specialize in producing the good in which they have a comparative advantage 0 A. Tessa: Sue loses but Tessa gains ( B. Tessa; Tessa loses but Sue gains ° C. Sue; both Sue and Tessa gain 0 D. Sue; Tessa gains but Sue loses E. Tessa; both Sue and Tessa gain

Explanation / Answer

Sue's opp.......is 4/40= 0.1 jackets

Tessa's opp......is 4/80=0.05 jackets

Tessa has a comparative advantage....

E> Tessa, both gains

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