Town A, in one hour, can produce either 4 hotdog buns, or 10 sausages. Town B, in one hour, can produce either 8 hotdog buns, or 6 sausages. There are 60 people in each town. If Town A and Town B applies the theory of comparative advantage, or specialization of production, how many total hours (ADD hours required to produce hotdog buns AND hours required to produce sausages) does it take to produce hotdog buns for 120 people and sausages for 120 people?

The answer is 27 hours

Explanation:

Solution

The Comparative advantage depends on production of the lower opportunity cost

The opportunity cost of a production is = maximum production of other good / maximum production of the good

Now,

The opportunity cost of hot dog bun for town A = 10/4=2.5

Thus,

The opportunity cost of hot dog bun for town B=6/10=0.6

So,

The town B has a comparative advantage in hot dog buns and A in sausages

Town A will produce-only sausages and it will take the time of

time in hours = total required a quantity of the good / number of products in an hour

Now,

The time for Town A for sausages=120/10=12 hours

The time for Town B for hot dog buns=120/8=15 hours

Therefore, The total time = 12+15=27 hours.