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Answer :
Final answer:
Wendy has both an absolute and comparative advantage over Ed in painting mugs and making sketches because she can produce more of both in one hour and her opportunity cost is lower.
Explanation:
In the scenario with Ed and Wendy, Wendy has both an absolute advantage and a comparative advantage over Ed in both painting mugs and sketches. An absolute advantage exists because Wendy can produce more mugs and sketches per hour than Ed can; she can produce 8 mugs or 3 sketches while Ed can only produce 6 mugs or 2 sketches. A comparative advantage exists because Wendy has a lesser opportunity cost in producing either mugs or sketches, given her higher productivity.
Comparative advantage refers to the ability to produce a good or service at a lower opportunity cost than other producers, not necessarily being the best or most efficient producer. Absolute advantage, on the other hand, involves being the most efficient producer, being able to produce a good using fewer resources than other producers. In this case, Wendy exhibits both.
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