In an eight-hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight-hour day, Rolfe can produce either 24 loaves of bread or 24 kilograms of butter.
Based on the information above, which statement is true?

Question

Quizplus · Accepted Answer

To determine comparative advantage, we need to look at the opportunity cost of producing each good. For Andy, the opportunity cost of producing one loaf of bread is giving up the production of 1/3 kilogram of butter (24 loaves/8 kilograms). For Rolfe, the opportunity cost of producing one loaf of bread is giving up the production of one kilogram of butter (24 loaves/24 kilograms). Therefore, Andy has a lower opportunity cost in producing bread and thus has a comparative advantage in producing bread.

In an Eight-Hour Day, Andy Can Produce Either 24 Loaves