--%>
Assignment Help - homework help

Advantage in production of two products

Explain by giving example of an absolute advantage in production of two products?

E

Expert

Verified

A CPA can paint her house faster and better than a painter.  She earns $50 per hour as accountant and can hire a painter for $15 per hour.  The CPA can do the painting job in 30 hours; it takes the painter 40 hours. Should she hire the painter?  On economic grounds, the opportunity cost is greater for the accountant to paint her house.  She is better off to specialize in accounting rather than sacrifice 30 x $50, or $1500, to paint her house, when she can hire the painter for 40 x $15, or $600.  The accountant will gain, and the painter will also gain because he is very inefficient in accounting.  It may take him 10 hours to prepare his tax return which would mean 10 x $15, hours or $150, in opportunity cost, whereas the accountant could probably complete the forms in 2 hours for a cost of $100.  This example shows that even if a person (the accountant) has an absolute advantage in production of two products (painting and accounting), it is still advantageous to specialize and trade.  The same is true for nations.

   Related Questions in Business Economics

  • Q : Gains from Exchange- Practice and

    When a world famous concert pianist is as well the world's fastest short order cook, he would most likely gain the most financially through devoting: (i) Full time to frying burgers (ii) Full time to piano practice and concerts. (iii) Half-time cooking and half-time p

    		•
  • Q : Introduction of the term Cost of

    Give a brief introduction of the term Cost of preference shares?

    		•
  • Q : Elucidate the overview of Business Cycle

    Elucidate the overview of Business Cycle?

    		•
  • Q : How government might manipulate its

    Explain how government might manipulate its expenditures and tax revenues to reduce unemployment?

    		•
  • Q : External costs and external benefits

    Explain the impact of external costs and external benefits on resource allocation

    		•
  • Q : Example of self interest to define

    The concept of _____ was demonstrated by _____ along with the quotation, “The defeat of a bit finger would remain the average European from sleeping which night,... but, given he never saw them, he will snore along with the most profound security over the loss o

    		•
  • Q : Good economic policy requires good

    Explain the statement: “Good economic policy requires good economic theory.”?

    		•
  • Q : Roundabout production Describe the

    Describe the merits of “roundabout” production?  Describe the term “division of labor”?

    		•
  • Q : Calculating fat-tax Question: Max has a

    Question: Max has a utility function U =√ x1x2 where x1 is litres of ice-cream and x2 is boxes of strawberries. The marginal utility of a litre if ice-cream is

  • Q : Technological advances in producing

    When given resources can now produce additional goods than was previously probable, then there have been a: (1) Stock market boom. (2) Competitive spurt which shrinks entrepreneurial gain. (3) Concavity reversal in the production possibilities frontier. (4) Bigger rel

    		•