HI5003 Economics for Business Assessment Task

Question 1: Week 2 Question 1, (7 marks)

Debra can make either 12 cakes or 16 cookies in 4 hours. Sam can make either 6 cakes or 12 cookies in 4 hours.

1. Who has an absolute advantage at producing cakes and who has an absolute advantage at producing cookies? Briefly explain your answers. (2 marks)
2. State Debra’s and Sam’s opportunity costs of producing one cake and one cookie. Draw and place your answer in a table which looks something like this: (3 marks)
3. If both Debra and Sam concentrate on producing only the product in which they have a comparative advantage, how many cakes and how many cookies will they produce? (2 marks)