Al and Bill are the only workers in a small factory that makes geegaws and doodads.Al can make 5 geegaws per hour or 10 doodads per hour.Bill can make 4 geegaws per hour or 24 doodads per hour.Assuming that neither of them finds one task more odious than the other,
A)Bill has a comparative advantage in producing geegaws and Al has a comparative advantage in producing doodads.
B)Bill has a comparative advantage in producing both geegaws and doodads.
C)Al has a comparative advantage in producing geegaws and Bill has a comparative advantage in producing doodads.
D)Al has a comparative advantage in producing both geegaws and doodads.
E)both have a comparative advantage in producing doodads.

Question

Quizplus · Accepted Answer

We can determine comparative advantage by looking at the opportunity cost of producing each good. The opportunity cost is the amount of one good that must be given up to produce one unit of the other good.

For Al, the opportunity cost of producing 1 geegaw is 2 doodads (he can make 5 geegaws or 10 doodads per hour). 
For Bill, the opportunity cost of producing 1 geegaw is 6 doodads (he can make 4 geegaws or 24 doodads per hour).

Therefore, Al has a comparative advantage in producing doodads (his opportunity cost of producing 1 doodad is only 0.5 geegaws) and Bill has a comparative advantage in producing geegaws (his opportunity cost of producing 1 geegaw is only 0.67 doodads).

So the answer is (C) Al has a comparative advantage in producing geegaws and Bill has a comparative advantage in producing doodads.

Al and Bill Are the Only Workers in a Small