Question

Phil can clean and polish silverware in 2 hours and change spark plugs in a car in 4 hours. Betty can clean and polish the same silverware in 1 hour and change spark plugs in a car in 1 hour. Phil does not have a comparative advantage in either activity.
a. True.
b. False.

Answer 1

Answer:

Letter b is correct. False.

Explanation:

This statement is false, as this question is related to the Theory of Comparative Advantages, which is defined as an economic concept that explains that even when one part is more productive than another part, this does not mean that there is no comparative advantage, as the What is relevant in this theory is the ratio of productivity that each part has.

In the case Betty has an absolute advantage, which is a more efficient production, using less time than Phill, but there is a comparative advantage, because although Phill is less efficient than Betty, he can specialize in certain sectors and present comparative advantage.

This theory is commonly used to explain why trade between two different countries, people or regions can be beneficial to both, regardless of whether one party is more productively efficient than the other.