Al and Bill are the only workers in a small factory which makes geegaws and doodads.Al can make 4 geegaws per hour or 12 doodads per hour.Bill can make 2 geegaws per hour or 8 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

To find comparative advantage, we need to find out the opportunity cost for each worker.

Opportunity cost of making 1 geegaw for Al: 12/4 = 3 doodads 
Opportunity cost of making 1 doodad for Al: 4/12 = 1/3 geegaw

Opportunity cost of making 1 geegaw for Bill: 8/2 = 4 doodads 
Opportunity cost of making 1 doodad for Bill: 2/8 = 1/4 geegaw

Comparing the opportunity costs, we can see that Al's opportunity cost of producing 1 geegaw is lower than Bill's. Similarly, Bill's opportunity cost of producing 1 doodad is lower than Al's. Therefore, Al has a comparative advantage in producing geegaws and Bill has a comparative advantage in producing doodads.

Al and Bill Are the Only Workers in a Small