Carlos is an executive of a major corporation. Boris is a baker. Carlos earns a salary ten times as large as the salary Boris earns, and Carlos has a much larger oven for baking break. Carlos can make a loaf of bread that tastes better than Boris's bread but Boris can bake faster.

Question

Quizplus · Accepted Answer

Carlos has an absolute advantage in making bread because he has a larger oven and can make bread that tastes better. However, he does not have a comparative advantage over Boris because Boris can bake fast, meaning that he can produce more bread per unit time compared to Carlos. Therefore, Boris has a lower opportunity cost of producing bread, which gives him a comparative advantage in baking.

Carlos Is an Executive of a Major Corporation