**(2022 Fall Midterm Q7-10)** In a day, Jo can catch 90 lobsters, or 20 crabs. In a day, Dan can catch 45 lobsters, or 40 crabs.


**(a)** _______ has the comparative advantage in catching lobsters, and _______ has the absolute advantage in catching crabs.

a. Dan; Jo

b. Jo; Dan

c. Dan; Dan

d. Jo; Jo
 
**(b)** In order for both Jo and Dan to engage in trade and specialize in the production that they have comparative advantage in, the term of trade must be larger than Answer field 1 for part 2

 lobsters per crab and less than Answer field 2 for part 2 lobsters per crab.




Let's break this down step by step:

### Part (a): Comparative and Absolute Advantage

1. **Comparative Advantage** is determined by who has the lower opportunity cost in producing one good relative to the other. 
2. **Absolute Advantage** is determined by who can produce more of a good in a given time period.

- **Jo's daily production possibilities:**
  - 90 lobsters or 20 crabs.
  - Jo's opportunity cost of 1 lobster = \(\frac{20}{90} = \frac{2}{9}\) crabs.
  - Jo's opportunity cost of 1 crab = \(\frac{90}{20} = 4.5\) lobsters.

- **Dan's daily production possibilities:**
  - 45 lobsters or 40 crabs.
  - Dan's opportunity cost of 1 lobster = \(\frac{40}{45} \approx 0.89\) crabs.
  - Dan's opportunity cost of 1 crab = \(\frac{45}{40} = 1.125\) lobsters.

#### Comparative Advantage in Lobsters:
- Jo's opportunity cost of 1 lobster is \(\frac{2}{9} \approx 0.22\) crabs.
- Dan's opportunity cost of 1 lobster is 0.89 crabs.
- Since Jo gives up fewer crabs to catch lobsters, **Jo has the comparative advantage in catching lobsters**.

#### Absolute Advantage in Crabs:
- Jo can catch 20 crabs per day, while Dan can catch 40 crabs per day.
- Since Dan can catch more crabs in a day, **Dan has the absolute advantage in catching crabs**.

So the correct answer for part (a) is:  
**b. Jo; Dan**

---

### Part (b): Terms of Trade

- Jo's opportunity cost of 1 crab = 4.5 lobsters.
- Dan's opportunity cost of 1 crab = 1.125 lobsters.

For both Jo and Dan to benefit from trade, the **terms of trade** must fall between their opportunity costs. Specifically:
- The terms of trade must be **greater than 1.125 lobsters per crab** (Dan's opportunity cost) and **less than 4.5 lobsters per crab** (Jo's opportunity cost).

Thus, the terms of trade should be larger than **1.125** lobsters per crab and less than **4.5** lobsters per crab.

---

### Summary of Answers:
- **(a)** b. Jo; Dan
- **(b)** The terms of trade must be larger than **1.125** lobsters per crab and less than **4.5** lobsters per crab.

Would you like more details or have any questions?

### Related Questions:
1. How does the concept of opportunity cost influence comparative advantage?
2. What are the benefits of trade based on comparative advantage?
3. How is absolute advantage different from comparative advantage?
4. Can a country (or person) have both absolute and comparative advantages in producing the same good?
5. Why do the terms of trade need to be between the two opportunity costs?

### Tip:
Comparative advantage is about specializing in what you can produce most efficiently, even if someone else can produce more of both goods than you.

In a day, Jo can catch 90 lobsters, or 20 crabs. In a day, Dan can catch 45 lobsters, or 40 crabs.

(a) _______ has the comparative advantage in catching lobsters, and _______ has the absolute advantage in catching crabs.

a. Dan; Jo
b. Jo; Dan
c. Dan; Dan
d. Jo; Jo

(b) In order for both Jo and Dan to engage in trade and specialize in the production that they have comparative advantage in, the term of trade must be larger than Answer field 1 for part 2 lobsters per crab and less than Answer field 2 for part 2 lobsters per crab.

Explore a comparative advantage and absolute advantage problem where Jo and Dan catch lobsters and crabs. Learn how opportunity cost determines trade benefits, and see the specific terms of trade needed for mutual benefit. Suitable for high school students in Grades 10-12.

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