In One Hour,Sue Can Produce 50 Caps or 10 Jackets

question 71

Multiple Choice

In one hour,Sue can produce 50 caps or 10 jackets and Tessa can produce 70 caps or 7 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 each specialize in producing the good in which they have a comparative advantage and trade 1 jacket for 7 caps,________.

• A)0.2;0.10;Sue;Tessa gains but Sue loses
• B)5.0;10.0;Tessa;Sue loses but Tessa gains
• C)5.0;10.0;Sue;both Sue and Tessa gain
• D)0.2;0.10;Tessa;both Sue and Tessa gain
• E)0.2;0.10;Sue;both Sue and Tessa gain

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Definitions:

Deflation

A decrease in the general price level of goods and services, often resulting in increased purchasing power of the currency.

Full Employment

An economic situation where all available labor resources are being used efficiently and there is no cyclical unemployment, implying a low, stable rate of unemployment.

Aggregate Supply

The aggregate output of goods and services generated inside an economy, measured at a specific price level over a designated time frame.

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment, serving as a key indicator of economic health.