Question

Let us assume two students must prepare a presentation for their economics class. As part of their class presentation, they must do a series of calculations and prepare 50 PowerPoint slides. It would take James 10 hours to do the required calculation and 10 hours to prepare the slides. It would take Jane 12 hours to do the series of the calculations and 20 hours to prepare the PPT slides. A. How much time would it take the two students to complete the project if they divide the two tasks equally?B. How much time would it take the two students to complete the project if they use comparative advantage and specialize in calculating or preparing slides? C. If Larry and Kate have the same opportunity cost of $5 per hour, is there a better solution than for each to specialize in calculating or preparing slides?

Answer 1

James and Jane would take 10 hours if they divided tasks equally because they would work simultaneously. Specializing based on comparative advantage would complete the project in 12 hours, with James preparing the slides and Jane doing the calculations. Specialization remains the efficient strategy even when factoring the constant opportunity cost of $5 per hour for different individuals.

Step-by-step explanation:

Let's address the project tasks for James and Jane using concepts of comparative advantage and division of labour.

A. Division of Tasks Equally:

If James and Jane divide the tasks equally, James would take 5 hours for calculations (half of 10 hours) and 5 hours for PowerPoint slides (half of 10 hours). Jane would take 6 hours for calculations (half of 12 hours) and 10 hours for PowerPoint slides (half of 20 hours). Therefore, both would take the longest common time which is 10 hours since they are working simultaneously.

B. Specialization Based on Comparative Advantage:

James has a comparative advantage in preparing slides as he takes less time (10 hours compared to Jane's 20 hours). Jane has a comparative advantage in calculations, taking 12 hours where James takes 10 hours, but since both tasks must be done, the faster option for slide preparation should be chosen. Therefore, James focuses on slides, and Jane on calculations. James would complete the slides in 10 hours and Jane would complete the calculations in 12 hours. Considering they work simultaneously, the project would be finished in 12 hours, the longer time required for Jane to complete her part.

C. Opportunity Cost and Specialization:

Assuming Larry and Kate each have an opportunity cost of $5 per hour, and they are the same as James and Jane, there isn't a better solution than specializing based on comparative advantage. They still maximize efficiency by each focusing on the task they perform relatively better.

Overall, the efficient strategies lie in understanding one's own strengths and weaknesses in relation to the task at hand and maximizing productivity by allocating resources wisely, whether in educational settings or in the workforce.

Answer 2

A. How much time would it take the two students to complete the project if they divide the two tasks equally?

• James needs 10 hours to complete half the task and Jane needs 16 hours to do her part = total work 26 hours

B. How much time would it take the two students to complete the project if they use comparative advantage and specialize in calculating or preparing slides?

• If they specialize, then Jane should do the calculations (12 hours) and James should prepare the slides (10 hours) = total work 22 hours

C. If James and Jane have the same opportunity cost of $5 per hour, is there a better solution than for each to specialize in calculating or preparing slides?

• Yes, Jane should pay James so that he does the whole work all by himself. Since James opportunity cost is $5 per hour, his total economic cost of doing the work is $100, and half of that is $50. Jane's economic cost of doing her part is $60 (= 12 x $5), so if she pays any amount lower than $60 and equal or higher than $50 to James, then they would both win.

Step-by-step explanation:

50 powerpoint slides

James needs 10 hours to do the calculations and 10 hours to prepare the slides = 20 hours total / 2 = 10 hours

Jane needs 12 hours to do the calculations and 20 hours to prepare the slides = 32 hours total / 2 = 16 hours

James's opportunity cost of doing the calculations or preparing the slides is 10 / 10 = 1

Jane's opportunity cost of doing one hour of calculations is 20 / 12 = 1.67 hours of preparing slides.

Jane's opportunity cost of doing one hour of preparing slides is 12 / 20 = 0.6 hours of calculations.