Question
He must give up two meals to patch one hole.And it costs him one-half of a hole to make one meal.Amy can make more meals
He must give up two meals to patch one hole.And it costs him one-half of a hole to make one meal.Amy can make more meals and fix more holes in a day, compared to Benny. She is better and faster at both jobs. In economics, we say that Amy has an "absolute advantage" over Benny because she is better at both things.Now think about their opportunity costs, or in other words, compare the slopes of the two lines.Benny has to give up two meals to patch one hole. Amy has to give up three meals to patch a hole. It is cheaper for Benny to patch a hole than it is for Amy.Now we have an interesting situation. We have said that Amy is better than Benny at both jobs, and that is definitely true. But it is cheaper, in terms of meals, for Benny to patch a hole than it is for Amy. That means Benny has a "comparative advantage" over Amy in patching holes. He has to give up fewer meals to fix a hole than Amy does.
The question now is, should Amy and Benny trade with each other? Should Amy prepare some meals for Benny, and have Benny fix some holes for Amy? Or vice versa? What do you think??
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