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  • Comparative and Absolute Advantage

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    Lara Kim Perez
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    The document compares the burger and fries production of Jollibee and McDonald's over one week. Jollibee can produce more of both products in total, giving it an absolute advantage. However, McDonald's has a comparative advantage in fries production because it has the lowest opportunity cost of fries in terms of forgone burger production. Conversely, Jollibee has a comparative advantage in burger production as it has the lowest opportunity cost of burgers in terms of forgone fries production.

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    The document compares the burger and fries production of Jollibee and McDonald's over one week. Jollibee can produce more of both products in total, giving it an absolute advantage. However, McDonald's has a comparative advantage in fries production because it has the lowest opportunity cost of fries in terms of forgone burger production. Conversely, Jollibee has a comparative advantage in burger production as it has the lowest opportunity cost of burgers in terms of forgone fries production.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    9 views1 page

    Comparative and Absolute Advantage

    Uploaded by

    Lara Kim Perez
    The document compares the burger and fries production of Jollibee and McDonald's over one week. Jollibee can produce more of both products in total, giving it an absolute advantage. However, McDonald's has a comparative advantage in fries production because it has the lowest opportunity cost of fries in terms of forgone burger production. Conversely, Jollibee has a comparative advantage in burger production as it has the lowest opportunity cost of burgers in terms of forgone fries production.

    Copyright:

    © All Rights Reserved
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    Comparative and Absolute Advantage Example

    Burger Fries

    Jollibee 150 100

    Mc Donald’s 80 90

    Both Jollibee and Mc Donald’s prepare burger and fries in their store. In one week Jollibee can
    prepare 150 burgers or 100 fries while the Mc Donald’s can prepare 80 burgers and 90 fries.

    Absolute Advantage

    Jollibee can prepare more burgers or fries in one week than Mc Donald’s so that it has the
    Absolute advantage.

    Comparative Advantage

    Jollibee 150(burgers)/100(fries) 100(fries)/150(burgers)

    1 Fries = 1.5 Burger 1 Burger= 0.66 Fries

    Mc Donald’s 80(burgers)/90(fries) 90(fries)/80(burgers)

    1 Fries= 0.88 Burger 1 Burger= 1.125 Fries

    For Fries Mc Donald’s has the Comparative Advantage because it has the lowest
    opportunity cost.

    For Burgers Jollibee has the Comparative Advantage because it has the lowest
    opportunity cost.

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