Answer to Question #118803 in Microeconomics for xyz

Question

) Mary takes 4 minutes to make a sandwich and 6 minutes to mix a cocktail. Her sister Ash takes 4 minutes to make a sandwich and 4 minutes to mix a cocktail. Calculate each sister's opportunity cost. Which of the two sisters has an absolute advantage in making sandwiches? In mixing cocktails? Which of the two has a comparative advantage in making sandwiches? In mixing cocktails?

Answer 1

Each sister"s opportunity cost;

• For Mary:she takes 4 minutes to make a sandwich and 6 minutes to mix a cocktail, this shows that for an hour she makes 15 sandwiches and 10 cocktails.Now her opportunity cost for making sandwiches will be 10/15 which is 0.67 and mixing cocktail 15/10=1.5
• Ash can spend an hour to make 15 sandwiches and mix 15 cocktails which means that her opportunity cost will be 15/15 =1 sandwich per cocktail and 1 cocktail per sandwich
• Both have an absolute advantage in making sandwiches as each make 15 sandwiches per hour
• Ash has an absolute advantage in mixing cocktails she can mix 15 cocktail per hour which takes Mary to mix 10
• Mary has a comparative advantage in sandwiches since her opportunity cost is 0.67 lower than Ash's 1
• Ash has a comparative advantage in cocktails her opportunity cost of 1 sandwich per cocktail is 1 lower than Mary's opportunity cost at 1.5