Table 3.3

-Jimbo has a comparative advantage over Ned in producing a good if
A) Jimbo can produce more of the good than Ned can in a given time period.
B) Jimbo has a lower opportunity cost of producing the good than does Ned.
C) Jimbo has to trade off more than Ned does to produce the good.
D) Jimbo has a higher opportunity cost of producing the good than does Ned.

Question

Table 3.3
 
-Jimbo has a comparative advantage over Ned in producing a good if
A) Jimbo can produce more of the good than Ned can in a given time period. 
B) Jimbo has a lower opportunity cost of producing the good than does Ned. 
C) Jimbo has to trade off more than Ned does to produce the good. 
D) Jimbo has a higher opportunity cost of producing the good than does Ned.

Quizplus · Accepted Answer

Comparative advantage is a concept in economics that suggests that countries (or individuals) should specialize in producing goods and services that they are relatively more efficient at producing compared to their trading partners. The opportunity cost of producing a good is the value of the next best alternative that must be foregone in order to produce one more unit of the good. Therefore, if Jimbo has a lower opportunity cost of producing a good than Ned, it means that Jimbo can produce the good at a lower cost (in terms of foregone alternatives) than Ned can. In other words, Jimbo has a comparative advantage over Ned in producing the good.

Table 3.3 -Jimbo Has a Comparative Advantage Over Ned in Producing a Ned