Mary makes 10 pies and 20 cakes a day and her opportunity cost of producing a cake is 2 pies

Economics Dec 17, 2020

Mary makes 10 pies and 20 cakes a day and her opportunity cost of producing a cake is 2 pies.

Tim makes 20 pies and 10 cakes a day and his opportunity cost of producing a cake is 4 pies.

If Mary and Tim specialize in the good in which they have a comparative advantage? .

Expert Solution

Mary has a comparative advantage in cake because she has a lower opportunity cost of production than Tim. Tim has a comparative advantage in pies. This means that Tim will specialize in pies and Mary will specialize in cakes

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