Table 3-4

-Refer to Table 3-4. Which of the following is correct?
A)Alberta has a comparative advantage in baskets and Manitoba has a comparative advantage in birdhouses.
B)Alberta has a comparative advantage in birdhouses and Manitoba has a comparative advantage in baskets.
C)Alberta has a comparative advantage in neither good and Manitoba has a comparative advantage in both goods.
D)Alberta has a comparative advantage in both goods and Manitoba has a comparative advantage in neither good.

Question

Table 3-4
 
-Refer to Table 3-4. Which of the following is correct?
A)Alberta has a comparative advantage in baskets and Manitoba has a comparative advantage in birdhouses. 
B)Alberta has a comparative advantage in birdhouses and Manitoba has a comparative advantage in baskets. 
C)Alberta has a comparative advantage in neither good and Manitoba has a comparative advantage in both goods. 
D)Alberta has a comparative advantage in both goods and Manitoba has a comparative advantage in neither good.

Quizplus · Accepted Answer

From the table, we can see that the opportunity cost of producing one birdhouse in Alberta is 2/3 of a basket while in Manitoba it is 1/2 of a basket. Therefore, Manitoba has a lower opportunity cost of producing birdhouses and thus has a comparative advantage in birdhouses. Similarly, the opportunity cost of producing one basket in Alberta is 3/2 birdhouses while in Manitoba it is 1 birdhouse. Therefore, Alberta has a lower opportunity cost of producing baskets and thus has a comparative advantage in baskets. This matches with option B.

Table 3-4 -Refer to Table 3-4. Which of the Following Is Correct