Table 3-1

-Refer to Table 3-1.The farmer has an absolute advantage in
A)potatoes, and the rancher has a comparative advantage in meat.
B)meat, and the rancher has a comparative advantage in potatoes.
C)neither good, and the rancher has a comparative advantage in potatoes.
D)neither good, and the rancher has a comparative advantage in meat.

Question

Table 3-1
 
-Refer to Table 3-1.The farmer has an absolute advantage in
A)potatoes, and the rancher has a comparative advantage in meat. 
B)meat, and the rancher has a comparative advantage in potatoes. 
C)neither good, and the rancher has a comparative advantage in potatoes. 
D)neither good, and the rancher has a comparative advantage in meat.

Quizplus · Accepted Answer

The farmer can produce both potatoes and meat with fewer resources than the rancher. However, comparative advantage is determined by the opportunity cost of producing a good. In this case, the opportunity cost of producing potatoes for the farmer is relatively lower than the opportunity cost of producing potatoes for the rancher compared to producing meat. Thus, the rancher has a comparative advantage in meat and should specialize in producing it while the farmer should specialize in producing potatoes.

Table 3-1 -Refer to Table 3-1.The Farmer Has an Absolute Advantage in an Absolute