4. Comparative advantage

Alison and Tim are partners at a management consulting firm. They are trying to determine which of them has a comparative advantage in creating the 125 slides required for a sales pitch to a prospective client.

Alison can create 50 slides per hour. For other activities, she can bill clients $500 per hour. Alison's opportunity cost of creating slides is ($0.25, $4.00, $0.10 OR $10.00) per slide.

Tim's opportunity cost of creating slides is 20% higher than Alison's. However, as the junior partner, his billing rate is 15% lower. Based on all of these facts, ( Alison Or Tim) has a comparative advantage in creating slides.