Ellie and Brendan both produce apple pies and vanilla ice cream. If Ellie's opportunity cost of one apple pie is 1/2 gallon of ice cream and Brendan's opportunity cost of one apple pie is 1/4 gallon of ice cream, Ellie has a comparative advantage in the production of ice cream.

Question

Quizplus · Accepted Answer

Ellie's opportunity cost of producing one apple pie is higher in terms of ice cream, meaning she has to give up less ice cream to produce apple pies compared to Brendan. This implies Brendan has a comparative advantage in apple pies, and Ellie in ice cream, as comparative advantage is determined by who has the lower opportunity cost in production.

Ellie and Brendan Both Produce Apple Pies and Vanilla Ice