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Author Question: Suppose that Rosie and Betty spend their free time making cakes and cookies. Is it possible for ... (Read 126 times)

LaDunn

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on: Jun 29, 2018
Suppose that Rosie and Betty spend their free time making cakes and cookies.
 
  Is it possible for Betty to have an absolute advantage in the production of both cakes and cookies? Is it possible for Betty to have a comparative advantage in the production of both cakes and cookies? Explain.

Question 2

To draw your budget line between steak and lobster, all you need to know is your income.
 
  Indicate whether the statement is true or false


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Heffejeff

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Reply #1 on: Jun 29, 2018
Answer to Question 1

Yes, it is possible for Betty to have an absolute advantage in the production of cakes and cookies. This simply means that she is able to produce more per hour. However, Betty cannot have a comparative advantage in producing both cakes and cookies. Because the opportunity cost of producing a cookie is the reciprocal of the opportunity cost of making a cake, it is impossible to have the lower opportunity cost of each.

Answer to Question 2

FALSE


LaDunn

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Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

Mochi

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Reply 3 on: Yesterday
Excellent

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