Mason and Chloe each produce two goods. According to the principle of comparative advantage, the total output produced by these individuals will be greatest
A) if Chloe produces both goods and Mason produces nothing.
B) if each good is produced by the individual who has the lower opportunity cost of producing that good.
C) if each good is produced by the individual who has the higher absolute cost of producing that good.
D) if Mason produces both goods and Chloe produces nothing.

Question

Quizplus · Accepted Answer

According to the principle of comparative advantage, each individual should specialize in producing the good that they have a lower opportunity cost of producing. This means that if Mason is better at producing one good while Chloe is better at producing the other good, then they should each focus on producing the good they are better at producing in order to maximize total output. Thus, choice B is the best option.

Mason and Chloe Each Produce Two Goods