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Financial Planning: Discussing an Absolute Advantage

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As a manager of a financial planning business I have two financial planners, Phil and Francis. In an hour, Phil can produce either one financial statement or answer 10 phone calls, while Francis can either produce 3 financial statements or answer 12 phone calls. Does either person have an absolute advantage in producing both products? Should these two planners be self-sufficient (each producing statements and answering phones) or specialize?

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Solution Summary

In about 200 words, this solution discusses the concept of absolute advantage in producing products by first stating the assumptions of this problem and then determining efficiency levels between the two workers in question. Basic calculations have also been conducted and are included within the response.

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Let's start with a few assumptions.

1. There are 8 hours in a work day, 5 working days per week, 4 weeks per month, 12 months per year. Thus, the total number of hours that each person is available for work is 8 X 5 = 40 X 4 = 160 X 12 = 1920 per year. If Phil focuses on just ...

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