Economics in a Global Environment

Essay by megothic1University, Bachelor'sA, June 2007

download word file, 2 pages 5.0

As a manager of a financial planning business you have two financial planners, Phil and Francis. In an hour, Phil can produce either one financial statement or answer 8 phone calls, while Francis can either produce 2 financial statements or answer 10 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? Be sure to show your work.

In this example it is clear that in either scenario each of these financial planners can indeed produce both a financial statement as well as answer calls. In the case of Phil instead of answering 8 phone calls Phil could answer 4 calls and produce a financial statement. All Phil needs to do is allocate his time to 30 minutes producing his financial statement and 30 minutes to answer phone calls. If he does his financial statement first it would eliminate his need to rush and whether he answered 1,2,3 or 4 calls still would have given him the ability to do both task.

In the case of Francis, it shows that she can do 2 financial statements or 10 phone calls in the same time frame given to her counterpart. This is a no brainer if Francis is able to do 2 statements or 10 calls she can easily do 1 statement and 5 calls or maybe even push out 1 statement and 6 or 7 calls. Whatever the amount it is without a doubt that she can indeed do both in an hours time.

From my understanding of Production Possibilities Curve one can produce more of one product by sacrificing some of another product thus enabling to produce both but one would be less in amount to what is usually normal.

I think...