Jack and Amber are married. If Jack works in the labor market, he can earn a wage of $20 per hour while Amber can earn a wage of $10 per hour. When Jack spends time housekeeping he produces “Home Goods” which the couple value at $15 per hour. Amber housekeeping efforts yield output valued at $10 per hour. Who has an absolute advantage in the labor market? How do you know? Who has comparative advantage in the labor market? How do you know?

Jack and Amber are married. If Jack works in the labor market, he can earn a wage of $20 per hour while Amber can earn a wage of $10 per hour. When Jack spends time housekeeping he produces “Home Goods” which the couple value at $15 per hour. Amber housekeeping efforts yield output valued at $10 per hour.   Who has an absolute advantage in the labor market? How do you know? Who has comparative advantage in the labor market? How do you know?

 

Answer:

Jack Amber
LM 20 10
HK 15 10
both of them market Jack have the absolute advantage because he earns higher wages in both.
Jack have comparative advantage in Labor Market and Amber have in housekeeping because the opportunity cost is lower in these

Asked on February 14, 2018 in economics.
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