If Abigail can produce 4 portable power banks or 3 smartphones in a day, while Jacob can produce 1 portable power bank or 2 smart phones, then it is correct to state that
A) Abigail has a comparative advantage in producing smartphones.
B) Abigail has an absolute advantage in producing portable power banks but not smartphones.
C) Jacob has a comparative advantage in smartphones.
D) Jacob has an absolute advantage in smartphones.

Question

Quizplus · Accepted Answer

To determine comparative advantage, we need to look at the opportunity cost of producing one good in terms of the other. Abigail's opportunity cost of producing one portable power bank is 3/4 smartphones (4/3 = 1.33), while Jacob's opportunity cost of producing one portable power bank is 2 smartphones. Thus, Jacob has a lower opportunity cost of producing smartphones, which means he has a comparative advantage in their production.

If Abigail Can Produce 4 Portable Power Banks or 3