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Business, 28.02.2020 21:32 stodd9503

Sam and Teresa run a catering business in which they have two major tasks: getting new clients and preparing food for events and parties. It takes Sam 10 hours to prepare the food for an event and 5 hours of effort to get each new client. For Teresa, it takes 12 hours to prepare food for an event and 3 hours to get a new client. In this scenario, has an absolute advantage in food preparation, and has a comparative advantage in food preparation. Suppose that initially, Sam and Teresa are splitting both tasks for a large number of events. Then they decide to start shifting some work according to the principle of comparative advantage. In particular, the person with the comparative advantage in food preparation will take over preparing food for one more event by taking the necessary time away from getting more clients, and the other person will use the freed-up time from not preparing food for one event to get more clients. As a result, the total number of events for which food is prepared will remain unchanged, but the number of new clients will increase by .

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