An economy produces only food and shelter. There are two individuals in the economy: Bill and Mary. Mary's opportunity cost of producing 1 unit of shelter is 2 units of food. Bill's opportunity cost of producing 1 unit of shelter is 4 units of food.

Question

Quizplus · Accepted Answer

Mary has a lower opportunity cost of producing shelter, meaning she gives up less food production to produce shelter than Bill does. Therefore, Mary has a comparative advantage over Bill in the production of shelter.

An Economy Produces Only Food and Shelter