Which of the following describes comparative advantage?
A)Firm A can produce a good at a cost of $3 a unit,and Firm B can produce the same good at a cost of $4 a unit.
B)Jane can type 50 words per minute,and Joe can type 60 words per minute.
C)Firm A can produce 4 boxes of cereal in a day,and Firm B can produce 5 boxes of cereal in a day.
D)To produce a basket of wheat,Farmer John must give up growing 2 baskets of corn,whereas Farmer Ben must give up 3 baskets of corn to produce a basket of wheat.
E)Bill can read one book in a week,but it takes Jeannie 10 days to read the same book.

Question

Quizplus · Accepted Answer

Comparative advantage refers to the ability of one entity to produce a good or service at a lower opportunity cost (i.e., the cost of forgoing production of another good or service) than another entity. In this case, Farmer John has a lower opportunity cost of producing wheat than Farmer Ben, since he only has to give up 2 baskets of corn to produce a basket of wheat, compared to Farmer Ben's 3 baskets of corn. Therefore, Farmer John has a comparative advantage in producing wheat, while Farmer Ben has a comparative advantage in producing corn.

Which of the Following Describes Comparative Advantage