Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is correct?

Question

Quizplus · Accepted Answer

Comparative advantage means that one person can produce a good or service at a lower opportunity cost than the other person. Opportunity cost is measured in terms of what the person has to give up in order to produce a particular good or service.

In this scenario, Teddy can pick 60 pieces of fruit in a day, or catch 20 fish. This means that if he spends his whole day picking fruit, he is giving up the opportunity to catch 20 fish. Therefore, his opportunity cost of picking fruit is 20 fish. On the other hand, if he spends his whole day catching fish, he is giving up the opportunity to pick 60 pieces of fruit. Therefore, his opportunity cost of catching fish is 60 pieces of fruit.

Similarly, Homer can pick 100 pieces of fruit in a day, or catch 150 fish. This means that if he spends his whole day picking fruit, he is giving up the opportunity to catch 150 fish. Therefore, his opportunity cost of picking fruit is 150 fish. On the other hand, if he spends his whole day catching fish, he is giving up the opportunity to pick 100 pieces of fruit. Therefore, his opportunity cost of catching fish is 100 pieces of fruit.

Comparing the opportunity costs, we can see that Homer has a lower opportunity cost of catching fish than Teddy (100 pieces of fruit vs. 20 fish), while Teddy has a lower opportunity cost of picking fruit than Homer (20 fish vs. 150 pieces of fruit). Therefore, Homer has a comparative advantage in catching fish, while Teddy has a comparative advantage in picking fruit. This means that Teddy should specialize in picking fruit, while Homer should specialize in catching fish.

Overall, choice C is correct because it correctly identifies the comparative advantages of each individual.

Homer and Teddy Are Stranded on a Desert Island