Question

Jay and John both work at Alpha Clothing.  In a work day, they spend their time making...

Jay and John both work at Alpha Clothing.  In a work day, they spend their time making shirts and making pants. John can make 20 shirts or 5 pants in a day.  Jay can make 18 shirts or make 4 pants.

a. Which man has the absolute advantage in making pants?

b. Which man has the absolute advantage in making shirts?

c. Which man has the comparative advantage in making pants?

d. Which man has the comparative advantage in making shirts?

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Homework Answers

Answer #1
Shirts Pants
John 20 5
Jay 18 4

John is able to make more shirts as well as pants with the available resources. So, John has an absolute advantage in making Shirt as well as Pants.

A. John has absolute advantage in making Pants

B. John has absolute advantage in making Shorts.

Now calculating opportunity cost

Opportunity cost
John Jay
1 Unit of Shirt 0.25 units of Pant 0.22 units of Pant
1 Unit of pant 4 units of Shirt 4.5 units of Shirt

The opportunity cost of making shirt is low for Jay, while the opportunity cost of making pant is low for John.

C. John has comparative advantage in making Pants.

D. Jay has comparative advantage in making Shirts.

Please contact if having any query. Thank you.

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