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1 July, 03:55

Mary Jane is a lawyer who can earn $150 per hour in her law practice. She is also an excellent carpenter who can build cabinets three times as fast as the best carpenter, whose hourly wage is $20 per hour. Which of the following is a correct economic statement? a. Mary Jane has a comparative advantage in law so she should specialize in law and hire a carpenter to make her cabinets. b. Mary Jane has an absolute and comparative advantage in both law and carpentry, so she should make her own cabinets while continuing to practice law. c. Mary Jane is three times faster than any carpenter so she should give her law practice to become a carpenter. d. When carpenters work for lawyers, they should charge $150 per hour instead of $20 per hour. e. Because Mary Jane is an excellent carpenter, when the best carpenter works for Mary Jane, he can only charge one third as much, or $6.67 per hour.

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  1. 1 July, 04:04
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    The answer is: A) Mary Jane has a comparative advantage in law so she should specialize in law and hire a carpenter to make her cabinets.

    Explanation:

    Mary Jane has a comparative advantage by working as a lawyer over working as a carpenter. As a lawyer she can earn $150 an hour.

    Considering that Mary Jane is 3 times as fast as a good carpenter, her work as a carpenter could be valued as the combined work of three carpenters. But even three carpenters earn less than a lawyer; $60 an hour ($20 an hour per carpenter times 3 carpenters).

    So Mary Jane definitely should work as a lawyer and hire a carpenter or even three carpenters to build her cabinets.
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