e Page 19 Calvin and Hobbes run a company that sells wallet

e Page 19 Calvin and Hobbes run a company that sells wallet chains and wallet decals. Calvin is faster at making decals than chains, and Hobbes is faster at making chains than decals. Which statements accurately describe the situation? Correct Answer(s) Drag appropriate answerfs) here Company output will be maximized if Calvin Hobbes has a higher opportunity cost for makes all the decals and Hobbes makes all the chains. making decals than Calvin. Calvin has a comparative advantage for making decals. Company output will be maximized if Calvin and Hobbes both divide their time equally between making decals and making chains. Drag appropriate answerís) here Incorrect Answer(s)

Solution

Correct Answer:

Company output will be maximized I Calvin makes all the decals and Hobbes makes all the chains.

Hobbes has higher opportunity cost of making decals than that of Calvin

Calvin has a comparative advantage for making decals.

Explanation:

It is a case of comparative advantage and Calvin can produce decals more efficiently than that of Hobbes and Hobbes can produce chains more efficiently than that of decals. So, Calvin has lower opportunity cost for Decals, and Hobbes has lower opportunity cost of producing chains. It makes Calvin to have comparative advantage in making decals and Hobbes has comparative advantage in making chains.

Incorrect Answer:

Company output will be maximized if Calvin and Hobbes both divide their time equally in making decals and chain.