Question

Given Ted can wax 4 cars per day or wash 2 cars per day and Tom can wax 3 cars per day or wash 1 car per day. What is each man’s opportunity cost of waxing a car? Who has an absolute advantage of waxing cars? Who has a comparative advantage of waxing cars?

Answer 1

Answer:

OPPORTUNITY cost of Ted=2/4=0.5 car wash

OPPORTUNITY cost of Tom=1/3=0.33 car wash.

OPPORTUNITY cost is amount of other good given to produce more of one good.

Ted has absolute advantage.

Tom has comparative advantage.

Explanation:

See attached picture.