Which of the following describes comparative advantage?
A) Firm A can produce a good at a cost of $3 and Firm B can produce the good at a cost of $4.
B) Jane can type 50 words per minute and Joe can type 60 words per minute.
C) To produce a bushel of wheat Farmer John must give up 2 bushels of corn whereas Farmer Ben must give up 3 bushels of corn.
D) Company A can produce 4 boxes of cereal in a day whereas Company B can produce 5 boxes of cereal in a day.

Question

Quizplus · Accepted Answer

Comparative advantage refers to the ability of a country, individual, or firm to produce a particular good or service at a lower opportunity cost than other producers. In this scenario, Farmer John has a lower opportunity cost of producing wheat because he only has to give up 2 bushels of corn to produce one bushel of wheat, whereas Farmer Ben has to give up 3 bushels of corn to produce one bushel of wheat. Therefore, Farmer John has a comparative advantage in producing wheat, and Farmer Ben has a comparative advantage in producing corn.

Which of the Following Describes Comparative Advantage