Answer:
Martha has an absolute advantage in both the goods because she produces more number of quilts and batches of chocolate chip cookies with the same level of resources and duration.
For Martha:
Opportunity cost of producing a batch of chocolate chip cookies = [tex]\frac{70}{140}[/tex]
= 0.5 quilts
Opportunity cost of producing a quilt = [tex]\frac{140}{70}[/tex]
= 2 batches of chocolate chip cookies
For Jane:
Opportunity cost of producing a batch of chocolate chip cookies = [tex]\frac{8}{24}[/tex]
= 0.33 quilts
Opportunity cost of producing a quilt = [tex]\frac{24}{8}[/tex]
= 3 batches of chocolate chip cookies
Therefore, Martha has a comparative advantage in producing quilts because opportunity cost of producing a quilt is lower than Jane and Jane has a comparative advantage in producing batches of chocolate chip cookies because opportunity cost of producing a batch of chocolate chip cookies is lower than Martha.
