Table 2-6

Table 2-6 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces.
-Refer to Table 2-6.Which of the following statements is true?
A)Haley has a comparative advantage in making both products.
B)Serena has a comparative advantage in making both products.
C)Haley has a comparative advantage in making bracelets and Serena in making necklaces.
D)Haley has a comparative advantage in making necklaces and Serena in making bracelets.

Question

Table 2-6
  
Table 2-6 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces.
-Refer to Table 2-6.Which of the following statements is true?
A)Haley has a comparative advantage in making both products. 
B)Serena has a comparative advantage in making both products. 
C)Haley has a comparative advantage in making bracelets and Serena in making necklaces. 
D)Haley has a comparative advantage in making necklaces and Serena in making bracelets.

Quizplus · Accepted Answer

To determine comparative advantage, we look at the opportunity cost of producing one good over another. Haley's opportunity cost of producing one necklace is 1.5 bracelets (10/6.67) while Serena's opportunity cost of producing one necklace is 2 bracelets (10/5). Thus, Haley has a lower opportunity cost for producing necklaces and therefore has a comparative advantage in making necklaces. Similarly, Haley's opportunity cost of producing one bracelet is 0.67 necklaces (4/6) while Serena's opportunity cost of producing one bracelet is 1 necklace (5/5). Therefore, Serena has a comparative advantage in making bracelets. Therefore, the correct option is C, which says Haley has a comparative advantage in making bracelets while Serena has a comparative advantage in making necklaces.

Table 2-6 Table 2-6 Shows the Output Per Week of Two Jewelers