Question

Assume it takes Leonardo 10 minutes to make a donut and 30 minutes to make a carrot cake, and it takes Emilia 12 minutes to make a donut and 24 minutes to make a carrot cake. What is the opportunity cost to Leonardo of making a donut?

1. 	a.	6 carrot cakes
   	b.	3 carrot cakes
   	c.	1/3 of a carrot cake
   	d.	10 carrot cakes

1. True or False. If someone has an absolute advantage at milking goats, they will necessarily have a comparative advantage at milking goats.

   True

   False

Answer 1

ANSWER:

1)Option(c)1/3 of a carrot cake

Explanation:
As Opportunity cost of Leonardo making a donut
= Time taken for making a donut/ Time taken for making a carrot cake
= 10/30
=1/3

2) Option (b) False

Explanation:
As if a individual is having absolute advantage of milking goat doesn't necessarily means he/she will also have the comparative advantage on the same thing as comparative advantage is calculated by taking the lower of the opportunity cost arised for all the individuals for milking the goats. So even when a individual may be having absolute advantage on milking goat but may be other one will be have comparative advantage on milking goat.