Serena and Joe both produce sporting goods equipment. The table below shows the amount of equipment...

Serena and Joe both produce sporting goods equipment. The table below shows the amount of equipment each producer can produce if he/she devotes all of his/her time to each product. Using the theory of comparative advantage, choose the correct answer based on the information in the table

	Joe		Serena
	Baseballs	Footballs	Baseballs	Footballs
Devote all time to producing baseballs	10	0	4	0
Devote all time to producing footballs	0	10	0	8

Group of answer choices

-Joe should produce footballs and baseballs. Serena should find another occupation

-Serena should produce baseballs and Joe should produce footballs

-Serena should produce footballs and Joe should produce baseballs

-Both individuals should produce footballs, since nobody is interested in baseball any more

Solutions

Expert Solution

Ans.- (C)

Opportunity cost of producing 1 baseball:

for Joe = 10/10 = 1 football

for Serena = 8/4 = 2 footballs

Since opportunity cost of producing 1 baseball is lower for Joe so Joe has a comparative advantage in producing baseball. Therefore, Serena has a comparative advantage in producing footballs.

Hence ,Serena should produce footballs and Joe should produce baseballs.

Rahul Sunny answered 2 years ago

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