Tim and Hannah are partners at an architecture firm. They are trying to determine which of them has a comparative advantage in building the 25 models required for a sales pitch to a prospective client. Tim can build 20 models per hour. For other activities, he can bill clients $400 per hour. Tim's opportunity cost of building models is per model. Hannah's opportunity cost of building models is 35% higher than Tim's. However, as the junior partner, her billing rate is 30% lower. Based on all of these facts, has a comparative advantage in building models.

Tim and Hannah are partners at an architecture firm. They are trying to determine which of them has a comparative advantage in building the 25 models required for a sales pitch to a prospective client. Tim can build 20 models per hour. For other activities, he can bill clients $400 per hour. Tim's opportunity cost of building models is per model. Hannah's opportunity cost of building models is 35% higher than Tim's. However, as the junior partner, her billing rate is 30% lower. Based on all of these facts, has a comparative advantage in building models.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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