Question

Timmy can edit 2 pages in one minute and he can type 80 words in one minute. Olivia can edit 1 page in one minute and she can type 100 words in one minute. Timmy has an absolute advantage and a comparative advantage in editing, while Olivia has an absolute advantage and a comparative advantage in typing. True or false?

Answer 1

Answer:

True

Explanation:

A person has comparative advantage in production if he produces at a lower opportunity cost when compared with other people.

A person has absolute advantage in the production of a good or service If he produces more quantity of the good when compared with other people

To calculate comparative advantage, first find the opportunity cost:

Opportunity cost of timmy editing = 80/2=40 words

Opportunity cost of timmy typing = 2 / 80 = 0.025

Opportunity cost of oliva editing = 100/1= 100

Opportunity cost of oliva typing = 1/100=0.01

Olivia has a comparative advantage in typing while timmy has a comparative advantage in editing.

Olivia types more words than timmy, therefore she has an absolute advantage in typing.

Timmy edits more pages than oliva, Therefore, he has am absolute advantage in editing.

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