Tom and Jerry have one day to work, but two tasks to focus on: building chairs and tables. If Tom spends all day building chairs, he will make 16 chairs. If he instead devotes his day to building tables, Tom will make 4 tables. If Jerry spends his day building chairs, he will make 14 chairs; if he spends the day building tables, he will make 7 tables. Jerry has a comparative advantage at producing _____ because he has a _____ opportunity cost of making that good.
A) chairs; lower
B) chairs; higher
C) tables; lower
D) tables; higher

Question

Quizplus · Accepted Answer

Jerry has a comparative advantage in producing tables because he has a lower opportunity cost of making that good. To find the opportunity cost, we compare the ratio of chairs to tables for both Tom and Jerry. Tom can make 16 chairs or 4 tables in a day, meaning for Tom, the opportunity cost of making one table is 4 chairs (16 chairs / 4 tables). Jerry can make 14 chairs or 7 tables, meaning for Jerry, the opportunity cost of making one table is 2 chairs (14 chairs / 7 tables). Since Jerry gives up fewer chairs to make a table compared to Tom, Jerry has a comparative advantage in making tables due to a lower opportunity cost.

Tom and Jerry Have One Day to Work, but Two