Grade 12 · Social studies

Find comparative advantage from opportunity costs

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Example & extra help
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A can make 20 loaves and B can make 10, but neither producer’s alternative output is supplied. What prevents a bread comparative-advantage conclusion?

  1. equal bread opportunity costs
  2. B has comparative advantage in bread
  3. the data do not give both alternatives
  4. A has comparative advantage in bread
See the answer & why

the data do not give both alternatives

Bread output alone does not reveal the amount of another good given up.

A little hint: Use a common time limit and calculate what one extra unit requires giving up.

Use a common time limit and calculate what one extra unit requires giving up.

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