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Use the production possibilities table below to answer the following question. Assume constant opportunity costs for Tommy and Gina. Pillows per Day Rugs per Day
Use the production possibilities table below to answer the following question. Assume constant opportunity costs for Tommy and Gina.
Pillows per Day | Rugs per Day | |
---|---|---|
Tommy | 5 | 10 |
Gina | 15 | 15 |
Given the data above, which statement provides the correct rationale for a trade agreement of 1.5 rugs for 1 pillow? (2 points)
Gina's opportunity cost for producing pillows is less than Tommy's. | |
Tommy has a comparative advantage in both products, so he can dictate the terms of trade. | |
Gina has no incentive to trade with Tommy, because she has an absolute advantage in both products. | |
Tommy has a comparative advantage in rugs, and Gina has a comparative advantage in pillows. | |
Tommy has an opportunity cost that is lower than Gina for pillows, so he will want to trade pillows for rugs at a lower cost than he can produce them for himself. |
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