Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is CORRECT?
A) Homer has a comparative advantage in catching fish and Teddy has a comparative advantage in picking fruit.
B) Homer has a comparative advantage in picking fruit and Teddy has a comparative advantage in catching fish.
C) Homer has a comparative advantage in both catching fish and picking fruit.
D) Teddy has a comparative advantage in both catching fish and picking fruit.

Question

Quizplus · Accepted Answer

Homer's opportunity cost of catching one fish is 2/3 of a piece of fruit (100 fruits/150 fish), while Teddy's is 3 pieces of fruit (60 fruits/20 fish). Thus, Homer has a comparative advantage in catching fish because he gives up less fruit per fish caught. Conversely, Teddy's opportunity cost of picking one piece of fruit is 1/3 of a fish (20 fish/60 fruits), while Homer's is 1.5 fish (150 fish/100 fruits), making Teddy more efficient in fruit picking due to his lower opportunity cost.

Homer and Teddy Are Stranded on a Desert Island