Question

Assume the macro islands can produce either 25 fishing boats or 150 jars of guava jelly in one hour. the micro islands can produce either 30 fishing boats or 300 jars of guava jelly in the same time period. this data tells an economist that___________

Answer 1

Answer:

The correct answer is letter "C": the Macro Islands have a comparative advantage in producing fishing boats, and the Micro Islands have a comparative advantage in producing guava jelly.

Explanation:

Comparative advantage is an advantage an individual, organization or country has to use opportunity costs in their production compared to their competitors. The scenario described above does not imply that the individual, organization or country has an absolute advantage.

In the example proposed:

• Comparative advantage of Macro islands in fishing boats = $\frac{25}{150}= 0.17$
• Comparative advantage of Micro islands in fishing boats = $\frac{30}{300} = 0.10$

• Comparative advantage of Macro islands in jars = $\frac{150}{25} = 6$
• Comparative advantage of Micro islands in jars = $\frac{300}{30} = 10$

Thus, the Macro Islands have a comparative advantage in producing fishing boats, and the Micro Islands have a comparative advantage in producing guava jelly.