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25 December, 09:16

Lisa has a comparative advantage in writing papers over Laura, but Laura has an absolute advantage in writing papers over Lisa. Using your knowledge of comparative advantage and absolute advantage, what can you imply about Laura and Lisa and the amount of papers they each can write?

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  1. 25 December, 09:45
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    Laura can write more papers than Lisa, but Lisa has a low opportunity cost to doing so.

    Explanation:

    Absolute and comparative advantage are important concept in the field of economics and trade. These concepts are used to explain the basis of foreign trade.

    Absolute advantage refers to the situation when an economic agent can produce a product at better quality, faster and earn more profit than its competitor. It looks at the efficiency of producing a single good or service.

    Comparative advantage takes into account the opportunity cost of producing a good or service. The opportunity cost is the cost of sacrificing the alternative.

    Absolute advantage means Laura can write more papers than Lisa, but since Lisa has a comparative advantage she has a low opportunity cost to doing so.
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