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Question 17 A producer is said to have an absolute advantage in the production of a...

Question 17

A producer is said to have an absolute advantage in the production of a good when the producer ________ compared to other producers.

can produce more units of the good per hour

has a higher opportunity cost

has a lower opportunity cost

can sell the good at a higher price

Question 18

Scenario: Mark can make three tables and one chair in a day, while John can make four tables and one chair in a day.

Refer to the scenario above. Which of the following is true in this case?

John has a comparative advantage in making chairs.

John has an absolute advantage in making tables.

Mark has an absolute advantage in making tables.

Mark has a comparative advantage in making tables.

Question 19

Scenario: Mark can make three tables and one chair in a day, while John can make four tables and one chair in a day.

Refer to the scenario above. Which of the following is true in this case?

Mark has both comparative and absolute advantage in making chairs

John has both comparative and absolute advantage in making chairs.

Mark has both comparative and absolute advantage in making tables.

John has both comparative and absolute advantage in making tables.

Solutions

Expert Solution

17. Ans: can produce more units of the good per hour

Explanation:

A producer is said to have an absolute advantage in the production of a good when the producer can produce more units of the good per hour with the available or existing resources compared to other producers.

18.Ans: John has an absolute advantage in making tables.

Explanation:

Mark can make 3 tables and 1 chair in a day.

John can make 4 tables and 1 chair in a day.

So John has an absolute advantage in the production of tables.

19.Ans: John has both comparative and absolute advantage in making tables.

Explanation:

For Mark;

The opportunity cost of 1 table = 1 / 3 = 0.33 units of chair

The opportunity cost of 1chair = 3 / 1 = 3 tables

For John;

The opportunity cost of 1 table = 1 / 4 = 0.25 units of chair

The opportunity cost of 1chair = 4 / 1 = 4 tables

A country has comparative advantage in the production of a good in which it has lower opportunity cost as compared to other country.

Rahul Sunny answered 1 year ago

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