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Martha can produce 70 quilts or 140 batches of chocolate chip cookies in a month. Jane can produce 8 quilts or 24 batches of chocolate chip cookies in a month. Distinguish between comparative advantage and absolute advantage.

User Prisoner
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Answer:

Martha can produce 70 quilts or 140 batches of chocolate chip cookies:

Opportunity cost of producing a quilt = (140 ÷ 70)

= 2 batches of chocolate chip cookies

Opportunity cost of producing a batch of chocolate chip cookie = (70 ÷ 140)

= 0.5 quilts

Jane can produce 8 quilts or 24 batches of chocolate chip cookies:

Opportunity cost of producing a quilt = (24 ÷ 8)

= 3 batches of chocolate chip cookies

Opportunity cost of producing a batch of chocolate chip cookie = (8 ÷ 24)

= 0.33 quilts

Therefore, the comparative advantage is as follows:

Martha has a comparative advantage in producing quilt because it has a lower opportunity cost of producing quilt than Jane.

Jane has a comparative advantage in producing chocolate chip cookies because it has a lower opportunity cost of producing chocolate chip cookies than Martha.

Absolute advantage:

Martha has an absolute advantage in producing both the commodities because she can produce more amount of both the goods from the same level of resources as compared to Jane.

User Cwt
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