Consider the following scenario. Two friends, Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake one loaf of bread and one hour to make one pie. Joey takes four hours to bake one loaf of bread and four hours to make one pie. If Rachel and Joey decide to specialize in order to maximize their combined output, who should produce what? a. Joey should specialize in making pies because he has an absolute advantage. b. Rachel should specialize in making pies and Joey should specialize in making bread c. Joey should specialize in making pies and Rachel should specialize in making bread. d. Rachel should specialize in making bread and pies because she has a comparative advantage in both. e. Rachel should not specialize because she is better at producing both

Question

Yareli Patel

Business

16 December, 19:24

Consider the following scenario. Two friends, Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake one loaf of bread and one hour to make one pie. Joey takes four hours to bake one loaf of bread and four hours to make one pie. If Rachel and Joey decide to specialize in order to maximize their combined output, who should produce what? a. Joey should specialize in making pies because he has an absolute advantage. b. Rachel should specialize in making pies and Joey should specialize in making bread c. Joey should specialize in making pies and Rachel should specialize in making bread. d. Rachel should specialize in making bread and pies because she has a comparative advantage in both. e. Rachel should not specialize because she is better at producing both

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Answers (1)

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Gordon Avila · Answer 1

Option (b) is correct.

Explanation:

Rachel take:

1 hour to make one pie and 2 hours to bake a loaf of bread

Joey take:

4 hours to make one pie and 4 hours to bake a loaf of bread

Therefore,

Rachel is specialize in making bread because she can produce same quantity of pie with comparatively less amount of resources.

Joey is left with only one choice because Rachel is already producing pie, hence, Joey is specialized in producing bread and therefore, they can maximize the entire or combine output.