Question

6. Comparative and absolute advantage

Yakov and Ana are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of rye and corn each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing rye or corn or to produce rye on some of the land and corn on the rest.

	Rye	Corn
	(Bushels per acre)	(Bushels per acre)
Yakov	10	5
Ana	40	8

On the following graph, use the blue line (circle symbol) to plot Yakov's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Ana's PPF.

Yakov’s PPFAna’s PPF01002003004005006007008009001000200180160140120100806040200CORN (Bushels)RYE (Bushels)

has an absolute advantage in the production of rye, and has an absolute advantage in the production of corn.

Yakov's opportunity cost of producing 1 bushel of corn isbushels of rye, whereas Ana's opportunity cost of producing 1 bushel of corn isbushels of rye. Because Yakov has a opportunity cost of producing corn than Ana, has a comparative advantage in the production of corn, and has a comparative advantage in the production of rye.

Answer 1

Question:- has an absolute advantage in the production of rye, and   has an absolute advantage in the production of corn.

Correct Answer:- Ana has an absolute advantage in the production of rye, and Yakov has an absolute advantage in the production of corn.

Yakov's opportunity cost of producing 1 bushel of corn is bushels of rye:-

5 corn=10 Rye

1 Corn= 2 Rye

Ana's opportunity cost of producing 1 bushel of corn isbushels of rye.

8 Corn=40 Rye

1 Corn=5 Rye

Question:- Because Yakov has a   opportunity cost of producing corn than Ana,   has a comparative advantage in the production of corn, and   has a comparative advantage in the production of rye.

Correct Answer:- Because Yakov has a lesser opportunity cost of producing corn than Ana, Yakov has a comparative advantage in the production of corn, and Ana has a comparative advantage in the production of rye.