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Advantage and specialization

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As a manager of a financial planning business you have two financial planners. In one hour one can produce 1 financial statement or answer 10 phone calls, while the other planner can produce 3 financial statements or answer 12 phone calls. Does either person have an absolute advantage in producing both products? Should these planners be self sufficient or specialize?

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Solution Summary

This solution looks at whether one person has an absolute advantage over another and if specialization is desired.

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The second planner has an absolute advantage in producing both products since that person can produce more financial statements (3 versus 1) or answer more phone calls (12 versus 10) in an hour.

Comparative advantage: A lower relative or ...

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