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

Question

Quizplus · Accepted Answer

Mary's opportunity cost of producing shelter is lower than Bill's, meaning she has a comparative advantage in producing shelter. This does not necessarily mean she has a comparative advantage in producing food, as this information is not provided. Bill may have an absolute advantage in producing shelter, but this is not relevant to comparative advantage.

An Economy Produces Only Food and Shelter