Question

If Elizabeth can make 3 pies or bake 6 cakes per hour and Benjamin can make 2 pies or bake 8 cakes per hour, _____.

Answer 1

Step-by-step explanation:

Elizabeth should concentrate on making pie because she has a comparative advantage over Benjamin in pie making while Benjamin has comparative advantage in cake baking.

According to the Ricardian model of comparative advantage, countries should concentrate in the production of goods they have comparative advantage in making and exchange or import goods they do not have comparative advantage in making. This is the basis of trade between nations according to the Ricardian model.