Which of the following describes comparative advantage?
A) To produce a bushel of wheat Farmer John must give up 2 bushels of corn whereas Farmer Ben must give up 3 bushels of corn.
B) Company A can produce 4 boxes of cereal in a day whereas Company B can produce 5 boxes of cereal in a day.
C) Firm A can produce a good at a cost of $3 and Firm B can produce the good at a cost of $4.
D) Jane can type 50 words per minute and Joe can type 60 words per minute.

Question

Quizplus · Accepted Answer

Comparative advantage is about the relative cost of producing goods. In choice A, it shows that Farmer John has a lower opportunity cost in producing wheat compared to Farmer Ben, which is the essence of comparative advantage.

Which of the Following Describes Comparative Advantage