If Irene can make either four chairs or one table in an hour and Greg can make either three chairs or two tables in an hour, then
A) Irene has the absolute advantage in the production of tables.
B) Greg has the absolute advantage in the production of chairs.
C) Irene has the comparative advantage in the production of chairs.
D) Greg has the comparative advantage in the production of chairs.

Question

Quizplus · Accepted Answer

To determine comparative advantage, we need to calculate the opportunity cost of producing each item for each person.

For Irene, producing 4 chairs in an hour means she must give up producing 1 table in that same hour. Therefore, her opportunity cost of producing 1 table is 4 chairs.

For Greg, producing 3 chairs in an hour means he must give up producing 2 tables in that same hour. Therefore, his opportunity cost of producing 1 table is 1.5 chairs (calculated as 3 chairs / 2 tables).

Comparing the opportunity costs, we see that Irene has a lower opportunity cost for producing chairs (1) than Greg (1.5). Therefore, Irene has the comparative advantage in the production of chairs.

If Irene Can Make Either Four Chairs or One Table