4. Dawn Key is a very successful businesswoman. She is also skilled in the domestic arts. Though she could clean her house in two hours, she prefers to hire a cleaning lady who spends five hours doing the same job. Though she is a skilled cook, she hires a caterer when she hosts a party. The caterer takes ten hours to prepare the food, whereas Ms. Key could do the same work in only six. Why do Ms. Key's actions make sense in terms of comparative advantage?
5. Suppose that Crusoe can either catch 10 fish or gather 10 coconuts in 10 hours, and Friday can catch either 8 fish or 4 coconuts every 10 hours.
a) In terms of hours, what is the cost of fish to Friday? What is the cost of fish to Crusoe?
b) In terms of hours, what is the cost of coconuts to Friday? What is the cost of coconuts to Crusoe?
c) Explain why this is not the way an economist would measure costs. What would the cost of fish and coconuts be to Friday and Crusoe under this alternative measure?
d) Suppose that before trade, Friday and Crusoe both spend five hours fishing and five hours gathering coconuts. What will their production and consumption bundles look like?
e) Explain the changes they can make so they both end with more consumption.