Arthur can milk 10 goats per hour or shear 4 sheep per hour. Ben can milk 6 goats per hour or shear 3 sheep per hour. Who has the absolute advantage at milking goats? Who has the absolute advantage at shearing sheep? What are the opportunity costs of milking a goat for Arthur and Ben? What are the opportunity costs of shearing a sheep for Arthur and Ben? Based on comparative advantage, who should milk goats and how should shear sheep?

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.