Question

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 cake bake 10 cakes or make 5 pizzas in an hour. Jean can bake 12 cakes or make 8 pizzas in an hour.
Which cook has absolute advantage in baking cakes?
Which cook has the comparative advantage in baking cakes?
Which cook has the absolute advantage in making pizzas?
Which cook has the comparative advantage in making pizzas?

Answer 1

Answer:

(A) Jean has absolute advantage in baking cakes 12 to 10

(B) Vincent comparative advantage in baking pizza as his opportunity cost is lower: 0.5

(C) Jean absolute advantage in making pizza: 8 to 5

(D) Jean comparative advantage in making pizza

Explanation:

(A) jean bakes 12 cakes per hour while Vincent bakes 10

(B) it willl be the pizzas it renounce to do for baking:

Vincent: 5/10 = 0.5 opportunity cost for baking: make 0.5 pizzas

Jean 8/12 = 2/3 = 0.66 opportunity cost for baking: makie 0.66 pizza

(C) Jean makes 8 pizzas while Vincent does 5

(D) As Vincent has a lower opportunity cost for baking, it will have a higher opportunity cost for making pizzas. Thus, Jean will be comparative advantage