Question

102 Macroeconomics Spring20 - MAHONEY nd Trade Activities and Due Dates gnment Score: 66.6% Resources Hint Check Answe Question 5 of 7 > Vincent and Jean are two cooks who work in a village. Each of them can either bake cakes or make pizzas. Every ingredient is readily available to them, and the only scarce resource is the cooks' time. Vincent can bake 10 cakes or make 5 pizzas in an hour. Jean can bake 12 cakes or make 8 pizzas in an hour. Please answer the four questions 1. Which cook has the absolute advantage in baking cakes? 2. Which cook has the absolute advantage in making pizzas? Neither Jean Vincent O Jean Vincent Neither O 3. Which cook has the comparative advantage in baking cakes? 4. Which cook has the comparative advantage in making pizzas? Neither O Vincent Jean Vincent Jean Neither MacBook Pro

Answer 1

(1) Jean has absolute advantage in cakes (because she can bake more cakes per hour: 12 > 10).

(2) Jean has absolute advantage in pizzas (because she can bake more pizzas per hour: 8 > 5).

(3) Ans - Vincent

Explanation:

For Vincent,

Opportunity Cost of cakes = 5/10 = 0.5 pizza

Opportunity Cost of pizza = 10/5 = 2 cake

For Jean,

Opportunity Cost of cakes = 8/12 = 0.67 pizza

Opportunity Cost of pizza = 12/8 = 1.5 cake

Since Vincent can bake cakes at a lower Opportunity Cost than Jean can, Vincent has comparative advantage in cakes.

(4) So, Jean has comparative advantage in pizza.