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

Question

Quizplus · Accepted Answer

Comparative advantage is about the opportunity cost of producing goods. In choice D, Farmer John has a lower opportunity cost for producing wheat compared to Farmer Ben, indicating a comparative advantage.

Which of the Following Describes Comparative Advantage