Al and Bill are the only workers in a small factory which makes geegaws and doodads.Al can make 5 geegaws per hour or 15 doodads per hour.Bill can make 2 geegaws per hour or 12 doodads per hour.Assuming that neither of them finds one task more odious than the other,
A)Al has a comparative advantage in producing geegaws and Bill has a comparative advantage in producing doodads.
B)Bill has a comparative advantage in producing geegaws and Al has a comparative advantage in producing doodads.
C)Al has a comparative advantage in producing both geegaws and doodads.
D)Bill has a comparative advantage in producing both geegaws and doodads.
E)both have a comparative advantage in producing doodads.

Question

Quizplus · Accepted Answer

Comparative advantage is determined by comparing the opportunity cost of producing each good. The opportunity cost of producing geegaws is the amount of doodads that could have been produced in the same amount of time, and vice versa.
Al's opportunity cost of producing one geegaw is 3 doodads (since he could have produced 15 doodads in the same hour), while Bill's opportunity cost of producing one geegaw is 6 doodads (since he could have produced 12 doodads in the same hour).
Similarly, Al's opportunity cost of producing one doodad is 1/3 geegaw (since he could have produced 5 geegaws in the same hour), while Bill's opportunity cost of producing one doodad is 1/6 geegaw (since he could have produced 2 geegaws in the same hour).
Therefore, Al has a comparative advantage in producing geegaws (since his opportunity cost of producing them is lower) and Bill has a comparative advantage in producing doodads.

Al and Bill Are the Only Workers in a Small