Question

12. Bob is a lawyer with a large law firm. He is very good at preparing briefs and also is very good at typing. Bob's legal assistant Tom can prepare 1 legal brief in two hours and Bob can prepare 1 legal brief in one hour. In one hour Tom can type 6 pages and Bob can type 9 pages.
13. Which person has the absolute advantage in preparing briefs
14. Which person has the absolute advantage in typing
15. What is the opportunity cost of preparing one brief for Bob? Hint; Using the same time required to prepare a brief, how many pages can Bob type?
16. What is the opportunity cost of preparing one brief for Tom? Hint: Using the same time required to prepare a brief, how many pages can Tom type?
17. Which person has the comparative advantage in preparing briefs

18. Which person has the comparative advantage in typing?

Answer 1

1. Bob has the absolute advantage in preparing briefs as he can prepare 2 briefs in 2 hours while Tom can only prepare 1 brief in 2 hours

2. Bob has the absolute advantage in typing as well because he can type 9 pages in an hour while Tom can only type 6 pages per hour

3. To prepare 1 brief, bob has to sacrifice 1 hour, in this one hour, he can type 9 pages so his opportunity cost for 1 brief is 9 pages

4 To prepare 1 brief, tom has to work for 2 hours, in this time he can write 12 pages so his opportunity cost for 1 brief is 12 pages

5. Person with a lower opportunity cost has the comparative advantage,

here Bob has a lower opportunity cost for preparing a brief so he has a comparative advantage here.

6. Tom's opportunity cost will be lower in typing because his opportunity cost is higher in the briefing, lets compare the opportunity cost for both of them

Bob - His opportunity cost for 9 pages is 1 brief, for one page his opportunity cost will be: 1/9 = 0.11 briefings

Tom - His opportunity cost for 12 pages is 1 brief, for one page his opportunity cost will be: 1/12 = 0.08 briefings

so the opportunity cost of tom for typing is lower so he has a comparative advantage