Table 3-30
Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate.
-Refer to Table 3-30. Falda has a comparative advantage in the production of
A)wheat.
B)cloth.
C)both goods.
D)neither good.

Question

Table 3-30
Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. 
-Refer to Table 3-30. Falda has a comparative advantage in the production of
A)wheat. 
B)cloth. 
C)both goods. 
D)neither good.

Quizplus · Accepted Answer

Falda's opportunity cost of producing one unit of wheat is 0.5 units of cloth, while Varick's opportunity cost of producing one unit of wheat is 1 unit of cloth. Therefore, Falda has a lower opportunity cost in producing wheat and has a comparative advantage in the production of wheat.

Table 3-30 Assume That Falda and Varick Can Switch Between Producing Wheat