If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. According to The Principle of Comparative Advantage, Ana and Leo will be able to produce more overall if:
A)Ana specializes in fudge and Leo specializes in toffee.
B)Leo specializes in fudge and Ana specializes in toffee.
C)both Leo and Ana specialize in fudge.
D)the Principle of Comparative Advantage does not hold in this example.

Question

Quizplus · Accepted Answer

The Principle of Comparative Advantage states that everyone does best when each person specializes in the activities for which his or her opportunity cost is lowest. In this case, this means that Ana should specialize in fudge and Leo should specialize in toffee.

If Ana Devotes All Her Time to Making Fudge, She