Use the information below to answer the following questions.
Fact 2.3.2
Agnes can produce either 1 unit of X or 1 unit of Y in an hour,while Brenda can produce either 2 units of X or 4 units of Y in an hour.
-Refer to Fact 2.3.2.Which one of the following statements is true?
A)Brenda has an absolute advantage over Agnes in the production of both goods.
B)Agnes has a comparative advantage in the production of Y.
C)Brenda has a comparative advantage in the production of X.
D)Brenda will not gain from trade.
E)Agnes will not gain from trade.

Question

Quizplus · Accepted Answer

BBrenda can produce more of both goods X and Y in an hour than Agnes, indicating Brenda has an absolute advantage in the production of both goods. Agnes has a comparative advantage in the production of Y because she gives up less of X to produce Y compared to Brenda (1:1 for Agnes vs. 1:2 for Brenda).

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