An economy has two workers, paula and ricardo. every day they work, paula can produce 4 computers or 16 shirts, and ricardo can produce 6 computers or 12 shirts. to maximize total output, paula should specialize in producing while ricardo should specialize in producing ) computers; shirtsb) shirts; computersc) computers; computersd) shirts; shirts

B) shirts; computers

Explanation:

This is an example of theory of absolute advantage. It is often used to explain the pattern and benefit of trade between two countries, but it can also explain domestic trade as in this example.

Paula has absolute advantage (is quicker) in producing shirts and Ricardo has absolute advantage (is quicker) in producing computers.

The output is greatest when they produce with their best capacity.

Note: This is should be understood in trade context. That is, the output of Paula and Ricardo are somewhat similarly valuable to them. In normal context 4 computers are likely to count more than 16 shirts in output and so both should produce computers.

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answer; functional fixedness;