Figure 3-6
These figures illustrate the production possibilities available to Barney and Betty with eight hours of labour in their bakery.
-Refer to Figure 3-6. Who has a comparative advantage in each product?
A) Barney has a comparative advantage in both goods, and Betty has a comparative advantage in neither good.
B) Barney has a comparative advantage in loaves of bread, and Betty has a comparative advantage in pies.
C) Barney has a comparative advantage in neither good, and Betty has a comparative advantage in both goods.
D) Barney has a comparative advantage in pies, and Betty has a comparative advantage in loaves of bread.

Question

Figure 3-6
These figures illustrate the production possibilities available to Barney and Betty with eight hours of labour in their bakery. 
-Refer to Figure 3-6. Who has a comparative advantage in each product?
A) Barney has a comparative advantage in both goods, and Betty has a comparative advantage in neither good. 
B) Barney has a comparative advantage in loaves of bread, and Betty has a comparative advantage in pies. 
C) Barney has a comparative advantage in neither good, and Betty has a comparative advantage in both goods. 
D) Barney has a comparative advantage in pies, and Betty has a comparative advantage in loaves of bread.

Quizplus · Accepted Answer

To determine comparative advantage, we need to compare the opportunity costs of each baker. The opportunity cost of producing one loaf of bread for Barney is 0.5 pies (4 pies/8 hours of labor) while the opportunity cost of producing one loaf of bread for Betty is 1 pie (8 pies/8 hours of labor). Therefore, Barney has a comparative advantage in producing pies. Similarly, the opportunity cost of producing one pie for Barney is 2 loaves of bread (16 loaves/8 hours of labor) while the opportunity cost of producing one pie for Betty is 0.67 loaves of bread (5 loaves/8 hours of labor). Therefore, Betty has a comparative advantage in producing pies.

Figure 3-6 These Figures Illustrate the Production Possibilities Available to Barney and Barney