Question

Both Dave and Caroline produce sweaters and socks. If Dave's opportunity cost of producing 1 sweater is 3 socks, and Caroline's opportunity cost of producing 1 sweater is 5 socks, then
a. Dave has a COMPARATIVE ADVANTAGE in the production of sweaters.
b. Caroline has a COMPARATIVE ADVANTAGE in the production of sweaters.
c. Dave has a COMPARATIVE ADVANTAGE in the production of socks.
d. Dave has a COMPARATIVE ADVANTAGE in the production of both sweaters and socks.

Answer 1

Answer:

a. Dave has a COMPARATIVE ADVANTAGE in the production of sweaters.  

Explanation:

If both Dave and Caroline produce sweaters and socks. If Dave's opportunity cost of producing 1 sweater is 3 socks, and Caroline's opportunity cost of producing 1 sweater is 5 socks, then  Dave has a COMPARATIVE ADVANTAGE in the production of sweaters.

Comparative advantage can be defined as an economy's ability to produce goods and/or services at a lesser opportunity cost than other countries.

In the end comparative advantage gives a country the ability to sell those goods and services that he could produce at lower opportunity costs; cheaper to other countries.

This definition adequately describes the position  of Dave in relation to caroline, in the given Scenario.