Question

You and your colleague are sales representatives. The table displays the number of minutes it takes you to perform your primary tasks.

Place a phone call Process an application
you 7 11
your colleague 5 13

Prior to specialization, in an hour, you place five phone calls and process two applications. Your colleague places six phone calls and processes two applications. After specialization, the gains from trade are phone call(s) and application(s).

A. 1;1
B. 11;4
C. 12; 5
D. 9;5

Answer 1

After specialization, the gains from trade between two sales representatives are 1 additional phone call and 1 additional application, making A. 1 phone call; 1 application the correct answer.

Step-by-step explanation:

The question asks about the gains from trade after specialization between two sales representatives with different times to place a phone call and process an application. Calculating the gains involves determining how many additional phone calls or applications can be processed in an hour if each representative specializes in the task they are relatively more efficient at.

Prior to specialization, your hourly output is 5 phone calls and 2 applications (35 minutes for calls + 22 minutes for applications = 57 minutes). Your colleague's hourly output is 6 phone calls and 2 applications (30 minutes for calls + 26 minutes for applications = 56 minutes).

After specialization, if you focus solely on applications (which you process faster relative to your colleague), and your colleague focuses only on phone calls (which they can do faster relative to you), the output changes.

You can process 5 applications (55 minutes), and your colleague can place 12 phone calls (60 minutes). Comparing this specialized output to the initial non-specialized output, your combined gains from trade are 1 additional phone call (from 11 to 12) and 1 additional application (from 4 to 5).