Shawn can produce beach towels at a lower opportunity cost than Larissa. Who has an absolute or a comparative advantage in the production of beach towels?
A) Shawn has a comparative advantage.
B) Larissa has a comparative advantage.
C) Shawn has an absolute advantage.
D) Larissa has an absolute advantage.

Question

Quizplus · Accepted Answer

Shawn has a lower opportunity cost in producing beach towels, meaning he can produce them more efficiently than Larissa. This is the definition of comparative advantage. It does not indicate who has an absolute advantage, as that is measured by who can produce more output with the same amount of inputs, while comparative advantage is a comparison of opportunity costs.

Shawn Can Produce Beach Towels at a Lower Opportunity Cost