Find the production possibilities and comparative advantage
Abe and Max are tailors. Their production possibilities tables for trousers and jackets are given below. Abe chooses production alternatives D, while Max chooses alternatives E from his alternatives.
ABE: Production Possibilities Table
Product A B C D E F
Trousers 75 60 45 30 15 0
Jackets 0 10 20 30 40 50
MAX: Production Possibilities Table
Product A B C D E F G
Trousers 60 50 40 30 20 10 0
Jackets 0 5 10 15 20 25 30
a) For Abe 1 pair of trousers costs _____ jackets, and 1 jacket costs _____ pairs of trousers.
b) For Max 1 pair of trousers costs ______ jackets and 1 jacket costs _____ pairs of trousers.
c) The comparative advantage in making trousers lies with ______ because his opportunity cost is (higher, lower) _________. The comparative advantage in making jackets lies with ______ because his opportunity cost is (higher, lower)________.
d) If Abe and Max for a partnership, Abe should specialize in making __________, and Max should specialize in making ____________.
e) Working independently, Abe and Max produce a total of 50 pairs of trousers and 50 jackets. If each specializes fully, their combined output will be ______ pairs of trousers, and _______ jackets. Thus the gain from specialization is ______ 10 pairs of trousers and _______ jackets.
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