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_ Jake and Vicky are partners at a management consulting firm
_ Jake and Vicky are partners at a management consulting firm. They are trying determine which of them has a comparative advantage in ing4.
the 100 slides required for a sales pitch to a prospective client.
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Jake can create 25 slides per hour. For other activities, he can bill clients $500 per hour. Jake's opportunity cost of creating slides is lir per slide.
Vicky's opportunity cost of creating slides is 25% higher than Jake's. However, as the junior partner, her billing rate is 20% lower. Based on all of these facts, 1? has a comparative advantage in creating slides.
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Expert Solution
Jake's opportunity cost of creating slide= 500/ 25
= 20 per slide.
Vicky's opportunity cost is 25% higher than Jake's.
Vicky's opportunity cost= 20+ (20* 25%)
= 25 per slide.
Since, Jake's opportunity cost is lower than Vicky's (20< 25). So, Jake has comparative advantage in creating slides.
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