Question

Thelma and Louise are the only workers in a small factory which makes geegaws and doodads....

Thelma and Louise are the only workers in a small factory which makes geegaws and doodads. Thelma can make 5 geegaws per hour or 15 doodads per hour. Louise can make 2 geegaws per hour or 12 doodads per hour. Assuming that neither of them finds one task more odious than the other,

a. Thelma has a comparative advantage in producing geegaws and Louise has a comparative advantage in producing doodads.

b. Louise has a comparative advantage in producing geegaws and Thelma has a comparative advantage in producing doodads.

c. Thelma has a comparative advantage in producing both geegaws and doodads.

d. Louise has a comparative advantage in producing both geegaws and doodads.

e. both have a comparative advantage in producing doodads.

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Answer #1

Answer: a. Thelma has a comparative advantage in producing geegaws and Louise has a comparative advantage in producing doodads.

Explanation: Because to produce 1 unit of geegaws thelma has to sacrifice 3 units of doodads, and to produce 1 unit of geegaws Louise has to sacrifice 6 units of doodads. Therefore clearly, thelma is better of in producing geegaws whereas Louise is better of in producing doodads. Hence thelma have comparative advantage in producing geegaws and Louise have comparative advantage in producing doodads.

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