Question

please explain and answer numbers 4 and 5.

4) Refer to the table below. According to the table, Martha has the absolute advantage Companative Advantage One person Time to quer... has a compartive advantage Time to another if his or her opportunita Make a Pie Make a Cake of por Perming a tok Martha 60 minutes 80 minutes the cher Dosas opportunity cost Julia 50 minutes 60 minutes A) neither pies nor cakes. B) cakes. C) both pies and cakes. D) pies. lowest opportunity cost 5) Refer to the table above. has the comparative advantage in making pies the comparative advantage in making cakes. Pie = 6/8 pie taomin=816 Time to Time to Make a Pie Make a Cake 6/8 Martha 60 minutes 80 minutes Julia 50 minutes 60 minutes A) Julia; Julia B) Martha; Martha C) Martha; Julia D) Julia; Martha Co/45/6

Answer 1

4. Answer: A neither pies or cakes
Reason: Absolute advantage theory being one of the foremost theories of trade put forward by Adam Smith suggested that a country/ person might have absolute advantage in the production of some goods ( here pies and cakes) meaning they can produce some goods efficiently with less cost, less labour and a greater amount. In this way if countries or individual produce only those commodities in which they have absolute advantage, then they can exchange them for goods in which they have absolute disadvantage with other nations. This constituted the basis of trade between countries.
In this, Martha does not have absolute advantage in either pies or cakes because it takes her more time and energy to produce the same quantity as Julia who can produce the same goods with less time.

5. Answer:C. Martha; Julia.
Explanation: After absolute advantage theory comes the comparative advantage theory by David Ricardo which is by far the base of all modern trade theories. Comparative advantage suggested that instead of countries have absolute advantage, the basis of trade is comparative advantage. That means countries/ Individual produce, specialise and export in the production of those goods in which there is less opportunity cost (comparative advantage) and import those commodities in which they have comparative disadvantage.
Here Martha is comparatively at advantage if she produces pies and Julia if produces cakes. Your calculations are accurate.