Suppose You Can Type a Paper in Two Hours or Mow

question 203

Multiple Choice

Suppose you can type a paper in two hours or mow the lawn in four hours, while it takes your friend Gabriela eight hours to type a paper or two hours to mow the lawn. Which of the following is true?

• A) You have a comparative advantage in typing.
• B) You have a comparative advantage in mowing the lawn.
• C) You and Gabriela could save time if you mowed her lawn while she typed your paper.
• D) You and Gabriela cannot gain from specialization and trade.

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Definitions:

Interest

The cost of borrowing money, typically expressed as a percentage of the principal, paid by the borrower for the use of lender’s funds.

Compounded Interest

Interest that is computed on both the original amount of money and the interest it has already earned over past periods, whether it’s a savings or a loan.

Investments

Assets or items acquired with the intention of generating income or appreciating in value over time.

Annually

Occurring once every year; relating to a period or cycle of one year.