Question

Consider two individuals — Howard and Mai — each of whom would like to wear sweaters and eat tasty food. The gains from trade between Howard and Mai are least obvious in which of the following cases?a.Howard is very good at knitting sweaters and at cooking tasty food, but Mai’s skills in both of these activities are very poor.b.Howard is very good at knitting sweaters and at cooking tasty food; Mai is very good at knitting sweaters, but she knows nothing about cooking tasty food.c.Howard’s skills in knitting sweaters are fairly good, but his skills in cooking tasty food are fairly bad; Mai’s skills in knitting sweaters are fairly bad, but her skills in cooking tasty food are fairly good.d.Howard’s skills are such that he can produce only sweaters, and Mai’s skills are such that she can produce only tasty food.

Answer 1

Answer:

A. Howard is very good at knitting sweaters and at cooking tasty food, but Maia's skills in both of these activities are very poor

Explanation:

If Howard is very good at both activities, but Maia's is not good at any of them, Howard will not gain any benefit from trading with Maia, Howard is better off supplying himself with both products. As for Maia, she would gain a lot from trading but is not likely that Howard would agree to enter such a disadvantageous deal anyway.