--%>

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 : An Inquiry in the Nature and Causes The

    The first comprehensive work upon economics written within English was authored through Adam Smith in 1776 year and entitled that “An Inquiry within the Nature and Causes of: (1) Laws of Supply and Demand.” (2) Wealth of Nations.” (3

  • Q : Case of arbitrage while selling and

    Assume that melons sell for $5 in Brazil when moose pelts sell for $10, still into Canada melons sell for $10 as well as moose pelts sell for $5. A person who buys moose pelts within Canada to sell into Brazil would be doing: (1) speculation. (2) the “invisible

  • Q : Question 7 Question 7: You are given

    Question 7: You are given the following data about two firms: FIRM A Quantity 0 1 2 3 4 5 6 Total revenue ($) 0 10 20 30 40 50 60 Average revenue ($) ___ ___ ___ ___ ___ ___ ___ Marginal revenue ($) ___ ___ ___ ___ ___ ___ Total cost ($) 30 42 50 60 76 100 14

  • Q : Sources of not tax revenue Provide some

    Provide some sources of not tax revenue? Answer: Escheat, income from public enterprises, special assessment, fees and fines and so on.

  • Q : Introduction of the term Cost of

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

  • Q : Resources of private Capitalism I have

    I have a problem in economics on Resources of private Capitalism. Please help me in the following question. The Private individuals own most resources and find out how they will be employed in an economic system of: (1) Socialism. (2) Capitalism. (3)

  • Q : How can we evaluate cost of capital How

    How can we evaluate cost of capital?

  • Q : Economics chapter 1 Suppose that on the

    Suppose that on the basis of a nation's production curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires but that it can get the robot from another country in exchange for 9,000 pizzas. Relate this information to the following statement: "Thr

  • Q : Who is a normal resident Normal

    Normal resident: The persons or an institution who lives in a country and whose centre of interest lies in that country is termed as a normal resident of that country.

  • Q : Resource payments correspond to

    Explain the foundation of economics where society’s material wants are Resource payments correspond to resource categories?