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20 March, 08:28

Suppose Hank and Tony can both produce corn. If Hank's opportunity cost of producing a bushel of corn is 2 bushels of soybeans and Tony's opportunity cost of producing a bushel of corn is 3 bushels of soybeans, then Hank has the comparative advantage in the production of corn.

a. True.

b. False.

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Answers (1)
  1. 20 March, 11:14
    0
    The correct answer is option a.

    Explanation:

    Comparative advantage refers to the situation where an individual, firm, or nation can produce a good at a comparatively lower opportunity cost.

    It is given here that,

    Hank's opportunity cost of producing a bushel of corn = 2 bushels of soybeans

    And,

    Tony's opportunity cost of producing a bushel of corn = 3 bushels of soybeans

    We see that Hank has a lower opportunity costs in the production of corn. So we can say Hank has a comparative advantage in the production of corn. Or in other words, Hank specializes in the production of corn.
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