Table 3-1

-Refer to Table 3-1. Which of the following is correct?
A)The Rancher has an absolute advantage in both goods, and the Rancher has a comparative advantage in meat.
B)The Rancher has an absolute advantage in meat, and the Rancher has a comparative advantage in potatoes.
C)The Rancher has an absolute advantage in meat, and the Rancher has a comparative advantage in neither good.
D)The Rancher has an absolute advantage in both goods, and the Rancher has a comparative advantage in potatoes.

Question

Table 3-1
 
-Refer to Table 3-1. Which of the following is correct?
A)The Rancher has an absolute advantage in both goods, and the Rancher has a comparative advantage in meat. 
B)The Rancher has an absolute advantage in meat, and the Rancher has a comparative advantage in potatoes. 
C)The Rancher has an absolute advantage in meat, and the Rancher has a comparative advantage in neither good. 
D)The Rancher has an absolute advantage in both goods, and the Rancher has a comparative advantage in potatoes.

Quizplus · Accepted Answer

The Rancher can produce 20 units of meat, while the Farmer can produce only 10 units. This means that the Rancher has an absolute advantage in meat. Similarly, the Rancher can produce 40 units of potatoes, while the Farmer can produce only 30 units. But when we calculate the opportunity cost of producing meat and potatoes, we see that the Rancher gives up only 2 units of potatoes to produce 1 unit of meat, while the Farmer gives up 3 units of potatoes to produce 1 unit of meat. Therefore, the Rancher has a comparative advantage in potatoes, and not in meat. Therefore, option B is correct.

Table 3-1 -Refer to Table 3-1. Which of the Following Is Correct