Katrina and David can both produce pizzas and loaves of bread.In one hour, Katrina can produce 10 pizzas or 20 loaves of bread.In one hour, David can produce 6 pizzas or 18 loaves of bread.

Which of the following is a true statement about absolute advantage?

multiple choice 1

• Katrina has an absolute advantage in pizza but not in bread.
• David has an absolute advantage in both goods.
• Katrina has an absolute advantage in both goods.
• Katrina has an absolute advantage in bread but not in pizza.
• Which of the following is a true statement about comparative advantage?

multiple choice 2

• Katrina has a comparative advantage in bread.
• Katrina has a comparative advantage in both goods.
• Katrina has a comparative advantage in pizza.
• David has a comparative advantage in both goods.

Assuming that workers are not all equally productive in producing each good, the opportunity cost of producing one good in terms of the other:

• increases as more of a good is produced, because skills vary among workers.
• decreases as more of a good is produced, because skills vary among workers.
• changes in an indeterminate way.
• is constant as more of a good is produced, because skills are similar among workers.

Suppose three volunteers are preparing cookies and cupcakes for a bake sale. Diana can make 27 cookies or 18 cupcakes per hour; Andy can make 25 cookies or 17 cupcakes; and Sam can make 10 cookies or 12 cupcakes per hour.

a. Who has the absolute advantage at making cookies?

Sam, Andy or Diana.

b. Who has the absolute advantage at making cupcakes?

Andy, Diana or Sam