Bill and Jen are the only two people in an economy.Each has 10 hours in which they can either make croissants, juice or some combination of both products.In takes Bill 1 hour to make one croissant and one hour to make a litre of juice.It takes Jen 20 minutes to make a croissant and 40 minutes to make a litre of juice.Which statement is true?

Question

Quizplus · Accepted Answer

Bill takes the same amount of time to produce either good, showing no comparative advantage in either. Jen, however, can produce both goods more efficiently than Bill (3 croissants or 1.5 liters of juice per hour for Jen vs. 1 croissant or 1 liter of juice per hour for Bill), but her efficiency is greater in croissant production (3 per hour vs. 1.5 per hour for juice), giving her the comparative advantage in croissants and Bill the comparative advantage in juice by default, as comparative advantage is relative.

Bill and Jen Are the Only Two People in an Economy.Each