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Fact 2.3.1
In an eight-hour day,Andy can produce either 24 loaves of bread or 8 kilograms of butter.In an eight-hour day,Rolfe can produce either 8 loaves of bread or 8 kilograms of butter.
-Refer to Fact 2.3.1.Which one of the following statements is true?
A)Andy has an absolute advantage in butter production.
B)Rolfe has an absolute advantage in butter production.
C)Andy has a comparative advantage in bread production.
D)Andy has a comparative advantage in butter production.
E)Rolfe has a comparative advantage in bread production.

Question

Quizplus · Accepted Answer

To determine comparative advantage, we need to look at the opportunity cost of each person's production. Andy can produce 3 loaves of bread for every 1 kilogram of butter he gives up (24/8=3), while Rolfe can produce only 1 loaf of bread for every 1 kilogram of butter he gives up (8/8=1). Therefore, Andy has a comparative advantage in bread production, as he gives up less bread to produce a kilogram of butter compared to Rolfe.

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