If Abigail can produce 4 tablets or 3 radios in a day, while Jacob can produce 1 tablet or 2 radios, then it is correct to state that
A) Abigail has a comparative advantage in producing radios.
B) Abigail has an absolute advantage in producing computers but not radios.
C) Jacob has a comparative advantage in radios.
D) Jacob has an absolute advantage in radios.

Question

Quizplus · Accepted Answer

To determine comparative advantage, we need to compare the opportunity costs of producing each good. Abigail's opportunity cost of producing one tablet is (3/4) radios, while Jacob's opportunity cost of producing one tablet is (1/2) radios. Since Jacob's opportunity cost of producing tablets is lower than Abigail's opportunity cost, Jacob has a comparative advantage in producing tablets. Similarly, Abigail's opportunity cost of producing one radio is (4/3) tablets, while Jacob's opportunity cost of producing one radio is (1/2) tablets. Therefore, Abigail has a comparative advantage in producing radios.

If Abigail Can Produce 4 Tablets or 3 Radios in a Day