If Eddie can produce 40 milk shakes or 20 banana splits in an hour, and Tina can produce 30 milk shakes or 16 banana splits in an hour, then Tina has a comparative advantage in producing milk shakes.

Question

Quizplus · Accepted Answer

To determine who has a comparative advantage in producing milk shakes, we need to compare their opportunity cost. Eddie's opportunity cost of producing one milk shake is 0.5 banana split (he could have produced 20 banana splits in the same hour). Tina's opportunity cost of producing one milk shake is 0.8 banana split (she could have produced 24 banana splits in the same hour). Therefore, Eddie has a lower opportunity cost of producing milk shakes and thus has a comparative advantage in producing them.

If Eddie Can Produce 40 Milk Shakes or 20 Banana