--%>

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 the Exchange Even people who

    Even people who are extremely good at everything couldn’t encompass: (i) absolute benefits in approximately everything. (ii) Much higher incomes than average. (iii) Comparative benefits in everything. (iv) Superior natural endowments of talent.

    Q : Equal share criterion of distribution

    According to the equivalent share criterion of the distribution, individuals must: (1) Share income according to personal requirement. (b) All make equivalent shares of output. (3) Each consists of incomes equivalent to their productive output. (4) Re

  • Q : Illustrate the 4th role is the

    Illustrate the 4th role is the reallocation of resources?

  • Q : Restriction of laissez-faire government

    A laissez-faire government is restricted to finding: (1) property rights within a simple fashion and to enforcing private contracts. (2) market prices which guarantee equitable resource allocations. (c) how resources will be allocated efficiently. (4)

  • Q : Elucidate types of unemployment

    Elucidate types of unemployment?

  • Q : Example of public goods Drinking at a

    Drinking at a public water fountain is: (w) a public good because anyone may drink from it. (x) results in a negative externality because others can’t drink from this at similar time. (y) a positive externality because you are benefiting by other’s provisi

  • Q : Describe the equation of a linear

    Describe the equation of a linear relationship?

  • Q : Explain the shapes of the

    Specify and explain the shapes of the marginal-benefit and marginal-cost curves and use these curves to determine the optimal allocation of resources to a particular product.  If current output is such that marginal cost exceeds marginal benefit, should more or l

  • Q : Examples and Applications of

    What are the Examples and Applications of International Trade?

  • Q : Speculators decreases price volatility

    Speculators decrease price volatility through, in effect, changing demand curves: (w) out at low prices, and shifting supply curves out at high prices. (x) out at low prices, and shifting supply curves within at low p