Question

Table 2-6

	Serena	Haley
Bracelets	8	9
Necklaces	16	12

Table 2-6 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces.

9) Refer to Table 2-6. Which of the following statements is true?

A) Haley has an absolute advantage in making both products.

B) Serena has an absolute advantage in making both products.

C) Haley has an absolute advantage in making bracelets and Serena in making necklaces.

D) Haley has an absolute advantage in making necklaces and Serena in making bracelets.

10) Refer to Table 2-6. What is Serena's opportunity cost of making a bracelet?

A) 2 necklaces

B) 1/2 of a bracelet

C) 1/2 of a necklace

D) 3/4 of a bracelet

Answer 1

9.Ans: C) Haley has an absolute advantage in making bracelets and Serena in making necklaces.

Explanation:

A producer is said to have an absolute advantage in the production of a good when the producer can produce more units of the good ( in absolute term) with the available resources as compared to other producers. So in the above scenario , Haley has an absolute advantage in making bracelets and Serena in making necklaces.

10.Ans: A ) 2 necklaces

Explanation:

Serena's opportunity cost of making a bracelet = 16 / 8 = 2 necklaces

Serena's opportunity cost of making a necklace = 8 / 16 = 1/2 bracelet or 1.33 bracelet