Table 7-2
Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
-Refer to Table 7-2.Select the statement that accurately interprets the data in the table.
A)Madison has a comparative advantage in making empanadas.
B)Austin has an absolute advantage in making tacos.
C)Austin has a comparative advantage in making empanadas.
D)Austin has a comparative advantage in making empanadas and making tacos.

Question

Table 7-2
  Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
-Refer to Table 7-2.Select the statement that accurately interprets the data in the table.
A)Madison has a comparative advantage in making empanadas. 
B)Austin has an absolute advantage in making tacos. 
C)Austin has a comparative advantage in making empanadas. 
D)Austin has a comparative advantage in making empanadas and making tacos.

Quizplus · Accepted Answer

To determine comparative advantage, we look at the opportunity cost of producing one good versus another. The opportunity cost is the amount of the other good that must be given up to produce one unit of a good. Austin can produce more empanadas than tacos (8 empanadas versus 6 tacos), so his opportunity cost of producing one empanada is 3/4 of a taco. Madison can produce more tacos than empanadas (12 tacos versus 4 empanadas), so her opportunity cost of producing one taco is 1/3 of an empanada. Therefore, Austin has a lower opportunity cost of producing empanadas, giving him a comparative advantage in making empanadas.

Table 7-2 Madison and Austin Own Cafe Ole'.Table 7-2 Lists