4 You and a friend have decided to work jointly on a course

4. You and a friend have decided to work jointly on a course project. Frankly, your friend is a less than ideal partner. His skills as a researcher are such that he can review and outline only two articles a day. Moreover, his hunt-and-peck style limits him to only 10 pages of typing a day. On the other hand, in a day you can produce six outlines or type 20 pages. a. Who has an absolute advantage in outlining, you or your friend? What about typing? b. Who has a comparative advantage in outlining? In typing? c. According to the principle of comparative advantage, who should specialize in which task?

Solution

a. Who has an absolute advantage in outlining, you or your friend? What about typing?

Ans: I have absolute advantage in both outlining and typing.

b. Who has a comparative advantage in outlining? In typing?

Ans. My opportunity cost of outlining an article = 20/6 = 3.33 pages

My friend\'s opportunity cost of outlining an article = 10/2 = 5 pages

As my opportunity cost of oulining the articles is less, I have the comparative advantage in outlining articles. And my friend has comparitive advantage in typing.

c. According to the principle of comparative advantage, who should specialize in which task?

Ans. I should outline articles and my friend should type.