Multiple Choice
Who has the absolute advantage in making scrambled eggs?
2. Introductory Economic Models
PPF - Comparative Advantage and Absolute Advantage
Struggling with Microeconomics?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Who has the comparative advantage in making fresh squeezed orange juice?
A
Joe
B
Carla
C
No one
Verified step by step guidance1
Identify the production possibilities for both Joe and Carla from the graphs. Joe can produce a maximum of 4 units of fresh squeezed orange juice or 4 scrambled eggs, and Carla can produce a maximum of 4 units of fresh squeezed orange juice or 8 scrambled eggs.
Calculate the opportunity cost for Joe to produce one unit of fresh squeezed orange juice. For Joe, the opportunity cost is the amount of scrambled eggs he forgoes, which is 1 scrambled egg per unit of orange juice.
Calculate the opportunity cost for Carla to produce one unit of fresh squeezed orange juice. For Carla, the opportunity cost is the amount of scrambled eggs she forgoes, which is 2 scrambled eggs per unit of orange juice.
Compare the opportunity costs calculated for Joe and Carla. Joe's opportunity cost is 1 scrambled egg per unit of orange juice, while Carla's is 2 scrambled eggs per unit of orange juice.
Determine who has the comparative advantage in making fresh squeezed orange juice. The person with the lower opportunity cost has the comparative advantage. In this case, Joe has the lower opportunity cost, so he has the comparative advantage in making fresh squeezed orange juice.
Related Videos
Related Practice
PPF - Comparative Advantage and Absolute Advantage practice set
Problem sets built by lead tutorsExpert video explanations