Figure 3-6

-Refer to Figure 3-6.Daisy has an absolute advantage in the production of
A) both goods and a comparative advantage in the production of pies.
B) both goods and a comparative advantage in the production of tarts.
C) neither good and a comparative advantage in the production of pies.
D) neither good and a comparative advantage in the production of tarts.

Question

Figure 3-6
 
-Refer to Figure 3-6.Daisy has an absolute advantage in the production of
A) both goods and a comparative advantage in the production of pies. 
B) both goods and a comparative advantage in the production of tarts. 
C) neither good and a comparative advantage in the production of pies. 
D) neither good and a comparative advantage in the production of tarts.

Quizplus · Accepted Answer

Daisy can produce both goods at a lower opportunity cost than Zoe, which gives her an absolute advantage in both. However, when we look at the opportunity cost of producing one good in terms of the other good, Daisy has a lower opportunity cost for producing tarts compared to pies. This means she has a comparative advantage in the production of tarts. Therefore, the best choice is B: both goods and a comparative advantage in the production of tarts.

Figure 3-6 -Refer to Figure 3-6.Daisy Has an Absolute Advantage in the Absolute