Suppose it takes Paul 3 hours to bake a cake and 2 hours to mow the lawn, and suppose it takes Tom 2 hours to bake a cake and 1 hour to mow the lawn. Which of the following statements is correct?
A)Paul has the absolute advantage in baking cakes.
B)Paul has the comparative advantage in mowing the lawn.
C)Paul has the comparative advantage in baking cakes.
D)Paul has the absolute advantage in mowing the lawn.

Question

Suppose it takes Paul 3 hours to bake a cake and 2 hours to mow the lawn, and suppose it takes Tom 2 hours to bake a cake and 1 hour to mow the lawn. Which of the following statements is correct?
A)Paul has the absolute advantage in baking cakes.
B)Paul has the comparative advantage in mowing the lawn.
C)Paul has the comparative advantage in baking cakes.
D)Paul has the absolute advantage in mowing the lawn.

Quizplus · Accepted Answer

For Paul, in the time it takes him to bake a cake, he could have mowed the lawn 1.5 times, and the time it takes him to mow the lawn, he could have made 2/3 of a cake. For Tom, in the time it takes him to bake a cake, he could have mowed the lawn 2 times, and in the time it takes him to mow the lawn, he could have baked 1/2 of a cake. Thus, Paul has a comparative advantage in baking cakes (because 1.5 < 2), and Tom has a comparative advantage in mowing the lawn (because 1/2 < 2/3). Tom has an absolute advantage in both tasks since he can do each more quickly than Paul.

Suppose It Takes Paul 3 Hours to Bake a Cake