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If Perry and Jordaneach spends all their time producing the good in which they have a comparative advantage and trade takes place at a price of 1 novel for 7 poems, then

User NeilK
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1 Answer

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Final answer:

Perry should specialize in producing poems, while Jordan should specialize in producing novels, as this will lead to higher total production and mutual benefits.

Step-by-step explanation:

In this scenario, Perry and Jordan are each producing the good in which they have a comparative advantage and trading at a price of 1 novel for 7 poems.

Perry's comparative advantage is in producing poems since he can produce them at a lower opportunity cost compared to novels, while Jordan's comparative advantage is in producing novels since he can produce them at a lower opportunity cost compared to poems.

By specializing in their respective areas of comparative advantage and trading, Perry and Jordan can achieve a higher level of total production and both parties can benefit from the trade.

User Qballer
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