Table 3-1

-Refer to Table 3-1. Which of the following is correct?
A)The Rancher has a comparative advantage in neither good, and the Farmer has a comparative advantage in both goods.
B)The Rancher has a comparative advantage in both goods, and the Farmer has a comparative advantage in neither good.
C)The Rancher has a comparative advantage in meat, and the Farmer has a comparative advantage in potatoes.
D)The Rancher has a comparative advantage in potatoes, and the Farmer has a comparative advantage in meat.

Question

Table 3-1
 
-Refer to Table 3-1. Which of the following is correct?
A)The Rancher has a comparative advantage in neither good, and the Farmer has a comparative advantage in both goods. 
B)The Rancher has a comparative advantage in both goods, and the Farmer has a comparative advantage in neither good. 
C)The Rancher has a comparative advantage in meat, and the Farmer has a comparative advantage in potatoes. 
D)The Rancher has a comparative advantage in potatoes, and the Farmer has a comparative advantage in meat.

Quizplus · Accepted Answer

Comparative advantage is based on who can produce a good at a lower opportunity cost. In the table, we can calculate the opportunity cost of producing one unit of each good. For the Rancher, the opportunity cost of producing one pound of meat is 1/4 potatoes, while for the Farmer, the opportunity cost of producing one pound of meat is 2/3 potatoes. This means that the Rancher has a lower opportunity cost of producing meat compared to the Farmer. Similarly, the opportunity cost of producing one pound of potatoes for the Rancher is 4 meat, while for the Farmer it is 3/2 meat. This means that the Farmer has a lower opportunity cost of producing potatoes compared to the Rancher. Therefore, the Rancher has a comparative advantage in producing meat, while the Farmer has a comparative advantage in producing potatoes.

Table 3-1 -Refer to Table 3-1. Which of the Following Is Correct