Consider model economy with just two individuals

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Reference no: EM131112901

Consider a model economy with just two individuals, Fred and Wilma. They both like to eat bread and cake. They each bake 10 hours a week. If Wilma spends all her time baking bread, she can bake 5 loaves. If she spends all her time making cakes, she will have 20 cakes. If Fred devotes all his time to bread, he will bake 10 loaves of bread, and if he spends all his time baking cake, he will have 25 cakes.

Which of the following statements is NOT true:

1) Wilma has a comparative advantage in cake

2) Wilma has an Absolute advantage in cake

3) Fred has an absolute advantage in bread

4) Fred has a comparative advantage in bread

Reference no: EM131112901

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