Answer to Question #161629 in Microeconomics for louise

Question

Tim and Drea can both make eggs and toast. If Drea's opportunity cost of making one egg is 2 pieces of toast and Tim's opportunity cost of making one egg is 4 pieces of toast, a mutually advantageous trade can be struck at a price of one egg for 3 pieces of toast.

Is this true or false?

Answer 1

True

To acquire a mutually advantageous trade, we get the average of the opportunity cost ;

$\frac{4+2}{2}=3$

Hence for a mutually advantageous trade can be struck at a price of one egg for 3 pieces of toast.