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Question
Suppose that Lo and Manuel can either run errands or wash dishes. Their maximum outputs per hour are listed in the following table. Given the same quantity of resources, at what terms of trade (relative price ratio) could they specialize and trade so that both consume outside their own production possibilities frontiers (PPFs)?
| Errands Run | Opportunity Cost of 1 Errand | Dishes Washed | Opportunity Cost of 1 Dish Washed | |
| Lo | 1 | 60 dishes | 60 | 1/60 errand |
| Manuel | 3 | 15 dishes | 45 | 1/15 errand |
a. 1 errand run per 75 dishes washed
b. 1 errand run per 30 dishes washed
c. 1 errand run per 12 dishes washed
d. 1 errand run per 10 dishes washed
e. 1 errand run per 6 dishes washed
Answer
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