Multiple Choice
Suppose Manufacturer A can produce 10 cars or 20 trucks per day, while Manufacturer B can produce 8 cars or 16 trucks per day. Based on this information, which manufacturer has the absolute advantage?
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2. Introductory Economic Models
PPF - Comparative Advantage and Absolute Advantage
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Suppose Alice can prepare 10 salads per hour while Bob can prepare 8 salads per hour. Who has the absolute advantage in selling salads?
A
Neither has an advantage
B
Both have the same advantage
C
Bob
D
Alice
Verified step by step guidance1
Understand the concept of absolute advantage: it refers to the ability of a person or entity to produce more of a good or service with the same amount of resources or time compared to others.
Identify the production rates given: Alice can prepare 10 salads per hour, and Bob can prepare 8 salads per hour.
Compare the production rates directly since absolute advantage is about who can produce more in the same time frame.
Since 10 salads per hour (Alice) is greater than 8 salads per hour (Bob), Alice has the absolute advantage in preparing salads.
Conclude that Alice has the absolute advantage because she can produce more salads per hour than Bob.
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