Bob and Stella are a married couple. Bob takes 10 minutes to change a lightbulb
ID: 1247811 • Letter: B
Question
Bob and Stella are a married couple. Bob takes 10 minutes to change a lightbulb and 2 minutes to fix a broken fuse. Stella takes 3 minutes to change a light bulb and 30 seconds to fix a broken fuse. Which of the following are true? Explain why each statement is true or false.a) Stella has a comp adv at fixing fuses, b/c she can do it faster than Bob.
b) Stella has a comp adv at changing light bulbs and fixing fuses, b/c she can do both them faster than Bob
c) Stella has an absolute adv at changing lightbulbs and fixing fuses, b/c she can do both of them faster than Bob
d) Bob has a comp adv at fixing fuses, b/c Stella has a comp adv at changing lightbulbs
e)Stella has a comp adv at changing lightbulbs.
Explanation / Answer
Person 1 has a comparative advantage over person 2 in doing a task if the cost of doing the task by person 1, relative to the cost of doing other tasks by 1 is lower than the cost of doing the task by person 2, relative to the cost of doing other tasks by 2. Bob can fix 5 fuses for every one lightbulb he changes (10min/2min) Stella can fix 6 fuses for every one lightbulb she changes (3min/.5min) a) False. Stella has a comparative advantage because she can fix fuses faster than Bob relative to how fast they can change lightbulbs. b) False. Since doing one task is relative to the other, Stella only has a comparative advantage in fixing fuses. c) True. Stella does have an absolute advantage because she is faster at both tasks. d) False. It is the opposite. e) False. Bob has the comparative advantage of changing lightbulbs.