(Answered) Absolut and Comparative Advantage\table[[,Time Needed to Build 1 Bike,\table[[Time Needed to…

Absolut and Comparative Advantage
Time Needed to Build 1
Bike
Computer
Matt
6 Hours
3 Hours
Tom
2 Hours
2 Hours
Who has the absolute advantage in bike building?
Who has the absolute advantage in Computer building?
Opportunity Cost of Building 1
Bike
Computer
Matt
2 Computers
.5 Bikes
Tom
1 Computer
1 Bike
Using the information above, who has the comparative advantage in building Bikes?
Using the information above, who has the comparative advantage in building Computers?
For the next questions assume Matt and Tom each specialize in production where they have their comparative advantage and are both given 120 Hours to produce these goods.
5. What does Matt produce and how many units does he produce?
6. What does Tom produce and how many units does he produce?
To have some of each good Tom gives Matt 20 Bikes and Matt gives Tom 30 Computers
7. How many of each item does Tom have after the trade? Could he have produced this mixture of goods in 120 hours?
8. How many of each Item does Matt have after the trade? Could he have produced this mixture of goods in 120 hours?