Question 2 (60 Points)

Bill and Hillary produce food and clothing. In an hour, Bill can produce 3 unit of food or 3 unit of clothing, while Hillary can produce 2 units of food or 6 units of clothing. They each work 100 hours in total.

a)Who has an absolute advantage in producing food? Who has an absolute advantage in producing clothing? Explain.

b)Who has a comparative advantage in producing food? Who has a comparative advantage in producing clothing? Explain.

c)Who should specialize in production of which product and why?

d)What is the gain from trade if before specialization both spent 50 % on food production and 50 % of time on clothes production?