Martha can produce 70 quilts or 140 batches of chocolate chip cookies in a month. Jane can produce 8 quilts or 24 batches of chocolate chip cookies in a month. Distinguish between comparative advantage and absolute advantage.

Martha can produce 70 quilts or 140 batches of chocolate chip cookies:

Opportunity cost of producing a quilt = (140 : 70)

= 2 batches of chocolate chip cookies

Opportunity cost of producing a batch of chocolate chip cookie = (70 : 140)

= 0.5 quilts

Jane can produce 8 quilts or 24 batches of chocolate chip cookies:

Opportunity cost of producing a quilt = (24 : 8)

= 3 batches of chocolate chip cookies

Opportunity cost of producing a batch of chocolate chip cookie = (8 : 24)

= 0.33 quilts

Therefore, the comparative advantage is as follows:

Martha has a comparative advantage in producing quilt because it has a lower opportunity cost of producing quilt than Jane.

Jane has a comparative advantage in producing chocolate chip cookies because it has a lower opportunity cost of producing chocolate chip cookies than Martha.

Absolute advantage:

Martha has an absolute advantage in producing both the commodities because she can produce more amount of both the goods from the same level of resources as compared to Jane.