Consider the Following Scenario

question 63

Multiple Choice

Consider the following scenario.Two friends,Rachel and Joey,enjoy baking bread and making apple pies.Rachel takes two hours to bake one loaf of bread and one hour to make one pie.Joey takes four hours to bake one loaf of bread and four hours to make one pie.If Rachel and Joey decide to specialize in order to maximize their combined output,who should produce what?

• A) Joey should specialize in making pies because he has an absolute advantage.
• B) Rachel should specialize in making pies and Joey should specialize in making bread.
• C) Joey should specialize in making pies and Rachel should specialize in making bread.
• D) Rachel should specialize in making bread and pies because she has a comparative advantage in both.
• E) Rachel should not specialize because she is better at producing both.

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Definitions:

Financial Resources

Refers to the funds that are available to a business, organization, or individual for spending in order to achieve their goals.

Outsourcing Alliance

A partnership where a company contracts out certain services or processes to another company, aiming to leverage specialized skills or cost advantages.

Preferred Supplier

A business that has been given a status that prioritizes its goods or services over others due to its quality, reliability, or cost-effectiveness.

Strategic Alliance

An alliance between two or more firms aiming to achieve common goals, with each maintaining their separate entity status.