contestada

Both Amy and Brad produce and consume apple pie and ice cream. In one hour, Brad makes five apple pies or ten gallons of ice cream while Amy makes fifteen apple pies or fifteen gallons of ice cream. Based on the above information, one can correctly conclude that ______.

Respuesta :

Answer:

Amy has absolute advantage in the production of Apples pies and ice cream.

Amy has comparative advantage in the production of Apple pies.

Brad has a comparative advantage in production of ice creams

Amy should specialise in the production of Apple pies, brad should specialise in the production of icecream

Explanation:

A person has comparative advantage in production if he produces at a lower opportunity cost when compared with other people.

Brad's opportunity cost:

In producing apple pies = 10 / 5 = 2

In producing ice cream :5 / 10 = 0.5

Amy's opportunity cost:

In producing apple pies : 15/15 = 1

In producing icecreams : 15/15 = 1

Amy has the lower opportunity cost when compared with Brad in producing apples pies. Therefore, she has comparative advantage in the production of Apple pies.

Brad has the lower opportunity cost when compared with Amy in producing ice cream. Therefore, he has comparative advantage in the production of ice cream.

A person should specialise and trade the good for which she has a comparative advantage.

A person has absolute advantage in the production of a good or service If he produces more quantity of the good when compared with other people.

Amy has absolute advantage in the production of both goods.

Based on the information given it can be concluded that:

  • Amy has an unbeatable advantage when it comes to making apple pies and ice cream.

  • Amy has a competitive advantage when it comes to making apple pies.

  • Brad has a competitive advantage in ice cream production.

  • Amy should specialize in apple pies, while Brad should specialize in ice cream.

When compared to other persons, a person has a comparative advantage in production if he produces at a lower opportunity cost.

Brad's opportunity cost:

[tex]\text{In producing apple pies } = \frac{10}{5} = 2\\\\\\text{In producing ice cream } = \frac{5}{10} = 0.5[/tex]

Amy's opportunity cost:


[tex]\text{In producing apple pies} = \frac{15}{15} = 1}[/tex]

[tex]\text{In producing icecreams} = \frac{15}{15} = 1[/tex]

  • When it comes to making apple pies, Amy has a smaller opportunity cost than Brad. As a result, she has a competitive advantage when it comes to making Apple pies.

  • When it comes to making ice cream, Brad has a lower opportunity cost than Amy. As a result, he has a competitive advantage in ice cream production.

  • A person should specialize in the good in which she has a competitive advantage and trades it.

  • When compared to other persons, a person has an absolute advantage in the creation of a thing or service if he produces a higher quantity of the good.

In the creation of both commodities, Amy has a distinct advantage.

For more information about the market theories, refer below:

https://brainly.com/question/15773434

Otras preguntas