Question

Suppose we have a 2-person world, with only Stephen and his friend LeBron. Suppose that Stephen can move 70 boxes or bake 28 cookies in an hour. Suppose that LeBron could move 20 boxes or bake 5 cookies in an hour. Is trade possible?

Answer 1

Trade is possible, their opportunity cost are diferent.

Step-by-step explanation:

They will trade if there is a benefit. To know if they will benefit from trade we haveto check the opportunity cost.

`\left[\begin{array}{cccccc}-&Boxes&OP Boxed&Cookies&OP Cookies\\Stephen (p)&70&2.5&28&0.4\\LeBron(p)&20&4&5&0.25&\end{array}\right]`

Their opportunity cost are diferent so there will be trade.

Do a cooky cost stephen 2.50 boxes

While to Lebron it cost 4 boxes

If they trade, they will benefit.