Multiple Choice
Who has the comparative advantage in making fresh squeezed orange juice?
2. Introductory Economic Models
PPF - Comparative Advantage and Absolute Advantage
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Who has the comparative advantage in making scrambled eggs?
A
Joe
B
Carla
C
No one
Verified step by step guidance1
Identify the production possibilities for both Joe and Carla from the graphs. Joe can produce either 4 units of fresh squeezed orange juice or 4 scrambled eggs, while Carla can produce either 4 units of fresh squeezed orange juice or 8 scrambled eggs.
Calculate the opportunity cost for Joe to produce scrambled eggs. For Joe, producing 1 scrambled egg costs him 1 unit of fresh squeezed orange juice (since 4 eggs = 4 orange juice).
Calculate the opportunity cost for Carla to produce scrambled eggs. For Carla, producing 1 scrambled egg costs her 0.5 units of fresh squeezed orange juice (since 8 eggs = 4 orange juice).
Compare the opportunity costs. Joe's opportunity cost of producing scrambled eggs is higher than Carla's, as Joe gives up 1 unit of orange juice per egg, while Carla gives up only 0.5 units.
Determine who has the comparative advantage. Since Carla has a lower opportunity cost for producing scrambled eggs, she has the comparative advantage in making scrambled eggs.
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