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2 years ago
The following figure illustrates the production possibilities curve of two individuals: Jack and John. Both of them have to divide their available time of 100 hours into writing economics articles and travel articles.

Comment on the absolute and comparative advantage of both the individuals.
Textbook 

Microeconomics


Edition: 1st
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2 years ago
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Absolute advantage refers to the ability of an individual, firm, or country to produce more of a certain good than other competing producers, given the same amount of resources. From the figure, John can write more of both economics and travel articles than Jack, given the same 100 hours to spend on the two jobs. Hence, John has an absolute advantage in writing both economics and travel articles.
Comparative advantage is the ability of an individual, firm, or country to produce a certain good at a lower opportunity cost than that of other producers.
Jack's opportunity cost of writing one economics article = 1.4 travel articles.
John's opportunity cost of writing one economics article = 0.89 travel articles.
Because John's opportunity cost of writing an economics article is less than Jack's opportunity cost of writing an economics article, John has a comparative advantage in writing economics articles.
Jack's opportunity cost of writing one travel article = 0.714 economics articles.
John's opportunity cost of writing one travel article = 1.125 economics articles.
Because Jack's opportunity cost of writing a travel article is less than John's opportunity cost of writing a travel article, Jack has a comparative advantage in writing travel articles.
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