Talented people that are the best at everything have a comparative advantage in the production of everything.?

Question

a. True b. False

Answer 1

False.

Here is a simple example. Suppose that I am good at both cutting my hair and picking winning stocks. I would be making $50 per hour at haircutting because I am SO fast. I could also be using that hour to pick stocks, making $200 per hour.

Even though I have an absolute advantage at both occupations, it makes sense to hire a barber at $20 per hour (he is not as efficient, so cheaper) and use my hour to pick stocks.

So, I can have an absolute advantage at everything, but have a comparative advantage in only a few things.

Answer 2

False.

Since Matty G wondered here and posted irrelevant nonsense I'll elaborate. In this question stem the talented people have an "absolute advantage" in the production of everything, meaning for any product they can make it more productively than any trading partner they could find.

But they shouldn't attempt to do everything for themselves -- instead, they'll maximize their income by focusing on the activity for which they have a comparative advantage -- the thing for which their abilities, compared with others', leads to them making the MOST income for themselves.

Answer 3

The short answer is False. Here's why:

This question refers to comparative advantage which began more or less with David Ricardo. Under Ricardian theory, each country should produce what it is best at. Ricardo had a number of implicit assumptions, two of which are directly relevant to what you are asking.

First, Ricardo assumed that globally all necessities can be met through production capacity. In other words, every country CAN produce what it is best at and focus on this because all its needs can be met either through its own production or through trade.

Second, Ricardo assumed that the production capacity (in terms of labor and capital) are finite and insufficient. This means it cannot produce everything it needs by itself and it needs to make the decision on what to produce and what to trade for.

The above example is excellent in relating this second point. When a country or individual faces a finite production or input capacity (in the above, this is manifest as "hours available to work"), the economic agent/country has to decide what to produce even if it's the best at everything.

An interesting side note that was considered by Ricardo but not extensively is political maneuvering through trade. As an example, suppose a country (A) had two neighbors (B and C). It can produce enough widgets to satisfy itself but one of its neighbors (B) cannot while the other (C) produces more than its share. Country A *may* choose to export widgets to B and import an equivalent number of widgets from C. This happens regularly in world trade and is often a consequence of imbalances in political relationships.

Answer 4

False.
Comparative advantage typically denotes a speciality

Answer 5

False because its not what you know.It's who you know.
I've bought CDs off the shelf that would have a guitar player playing to a song and he sounded like a beginner.
I could play circles around him on my guitar ,but the right person doesn't know my talent.
I could go really far with the right connections.
All I need is people to believe in me.
Once again I need to know the right people ,because its not what you know.It's who you know.
So therefor the answer to your question is still false.

Answer 6

c. may be.