Graph 3-2 These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour.
-According to Graph 3-2:
A)Amy has a comparative advantage in doughnuts, and Jim has a comparative advantage in coffee
B)Amy has a comparative advantage in both goods, and Jim has a comparative advantage in neither goods
C)Amy has a comparative advantage in coffee, and Jim has a comparative advantage in doughnuts
D)Amy has a comparative advantage in neither goods, and Jim has a comparative advantage in both goods

Question

Graph 3-2  These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour.
-According to Graph 3-2:
A)Amy has a comparative advantage in doughnuts, and Jim has a comparative advantage in coffee 
B)Amy has a comparative advantage in both goods, and Jim has a comparative advantage in neither goods 
C)Amy has a comparative advantage in coffee, and Jim has a comparative advantage in doughnuts 
D)Amy has a comparative advantage in neither goods, and Jim has a comparative advantage in both goods

Quizplus · Accepted Answer

Based on the graph, Amy's opportunity cost of producing one unit of coffee is 2/3 of a unit of doughnuts, while Jim's opportunity cost of producing one unit of coffee is 1 unit of doughnuts. Therefore, Amy has a comparative advantage in coffee since her opportunity cost of producing coffee is lower than Jim's. Similarly, Jim's opportunity cost of producing one unit of doughnuts is 0.5 units of coffee, while Amy's opportunity cost of producing one unit of doughnuts is 1.5 units of coffee. Therefore, Jim has a comparative advantage in doughnuts since his opportunity cost of producing doughnuts is lower than Amy's.

Graph 3-2 These Figures Illustrate the Production Possibilities Available