Question

Has an absolute advantage in the production of barley, and

Answer 1

Answer:

Neha has an absolute advantage in the production of barley

Neha has an absolute advantage in the production of alfalfa.

Lorenzo 's opportunity cost of producing 1 bushel of alfalfa is  3 bushels of barley.

Neha's opportunity cost of producing 1 bushel of alfalfa is  4 bushels of barley.

lower, Lorenzo

Neha

Explanation:

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A country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries.

A company has absolute advantage in the production of a good or service if it produces more quantity of a good when compared to other countries

Neha has an absolute advantage in the production of both Alfalfa and barley because he produces more quantities of the commodity than Lorenzo.

For Lorenzo,

Opportunity cost of producing  1 bushel of alfalfa = 18 / 6 = 3 bushels of barley

Opportunity cost of producing  1 bushel of barley = 6 / 18 = 0.33 bushels of alfalfa

For Neha,

Opportunity cost of producing  1 bushel of alfalfa = 28 / 7 = 4 bushels of barley

Opportunity cost of producing  1 bushel of barley = 7 / 28 = 0.25 bushels of alfalfa

Lorenzo's opportunity cost in producing alfalfa is lower than that of Neha, thus, Lorezno has a comparative advantage in the production of alfalfa

Neha's opportunity cost in producing barley is lower than that of Lorenzo, thus, Neha has a comparative advantage in the production of barley