Robinson Crusoe can produce 20 coconuts or 10 palm leaves in one day.Friday can produce 25 coconuts or five palm leaves in one day.Both individuals will be made better off through trade if Robinson specialises in producing coconuts and Friday specialises in producing palm leaves.

Question

Quizplus · Accepted Answer

Robinson Crusoe has a comparative advantage in producing palm leaves because he gives up fewer coconuts to produce each palm leaf compared to Friday (2 coconuts per palm leaf for Robinson vs. 5 coconuts per palm leaf for Friday). Friday has a comparative advantage in producing coconuts because he can produce more coconuts per day than Robinson. Therefore, for both to benefit from trade, Robinson should specialize in palm leaves and Friday in coconuts.

Robinson Crusoe Can Produce 20 Coconuts or 10 Palm Leaves