Question

Ben and Oakley are planting a garden together. If Oakley devotes all his time to planting trees, he can plant 3 trees an hour, and if he devotes all his time to planting flowers, he can plant 60 flowers an hour. If Ben devotes all his time to planting trees, he can plant 10 trees an hour, and if he devotes all his time to planting flowers, he can plant 50 flowers an hour. Which of the following statements is correct?

  

A. Oakley has both an absolute advantage and the comparative advantage in flowers.

   

B. Ben has the comparative advantage in flowers, but Oakley has the absolute advantage in flowers.

   

C. Oakley has the comparative advantage in flowers, but Ben has the absolute advantage in flowers.

   

D. Ben has both the absolute advantage and the comparative advantage in flowers.

Answer 1

	Flowers	Trees
Oakley	60	3
Ben	50	10

The above table lists the work that each Ben and Oakley can do in an hour.

For absolute advantage in flowers, we simply compare who can plant more flowers in an hour, and for absolute advantage in trees, we see who can plant more trees in an hour. Hence, from the above table, it is clear that Oakley has an absolute advantage in flowers as he can plant 10 more flowers than Ben while Ben has an absolute advantage in trees as he can plant 7 more trees in an hour as compared to Oakley.

Now let's calculate the comparative advantage.

For comparative advantage, we compare the opportunity cost of each good. The one with lower opportunity cost has a comparative advantage over the other.

	Flowers	Trees
Oakley	=3/60 = 1/20	=60/3 = 20
Ben	=10/50 = 1/5	=50/10 = 5

The above table calculates the opportunity cost for each person. For flowers, the opportunity cost is trees/ flowers and for trees, it is flowers/trees.

From the above calculation, it is clear that Oakley has a comparative advantage in flowers as his opportunity cost is less than that of Ben (1/20<1/5). While Ben has a comparative advantage in trees as his opportunity cost is less than that of Oakley (20>5).

From the above analysis, it is evident that Oakley has both an absolute advantage and the comparative advantage in flowers. Therefore, the correct option is A

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