You and a friend have decided to work jointly on a course project. Frankly, your

Question

You and a friend have decided to work jointly on a course project. Frankly, your friend is a less-than ideal partner. His skills as a researcher are such that he can review and outline only two articles a day. Moreover, his hunt-and-peck style limits him to only 10 pages of typing a day. On the other hand, in a day you can produce six outlines or type 20 pages. a. Who has an absolute advantage in outlining, you or your friend? What about typing? b. Who has a comparative advantage in outlining? In typing? c. According to the principle of comparative advantage, who should specialize in which task?

Explanation / Answer

a. Who has an absolute advantage in outlining, you or your friend? What about typing?

Ans: I have absolute advantage in both outlining and typing.

b. Who has a comparative advantage in outlining? In typing?

Ans. My opportunity cost of outlining an article = 20/6 = 3.33 pages

My friend's opportunity cost of outlining an article = 10/2 = 5 pages

As my opportunity cost of oulining the articles is less, I have the comparative advantage in outlining articles. And my friend has comparitive advantage in typing.

c. According to the principle of comparative advantage, who should specialize in which task?

Ans. I should outline articles and my friend should type.

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