Suppose Cathy and Lewis Work in a Bakery Making Pies

question 71

Multiple Choice

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. Which of the following statements is correct?

• A)Cathy has a comparative advantage in pies, and Lewis has an absolute advantage in pies.
• B)Cathy has a comparative and absolute advantage in pies.
• C)Lewis has a comparative and absolute advantage in pies.
• D)Lewis has a comparative advantage in pies, and Cathy has an absolute advantage in pies.

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Definitions:

Increase

A situation where there is a rise in quantity, size, number, value, or intensity of a particular variable or condition.

Complementary Goods

Products or services that are used together, where the demand for one is increased when the price of the other decreases.

Demand Curve

An illustration that displays how the price of a product or service correlates with the amount people want to buy during a specific time frame.

Price

The amount in currency estimated, obligatory, or contributed as payment for something.