Question

See the production possibility tables for Marketopia and Econlandia below. Marketopia Econlandia Cookies Pies Cookies Pies 0 18 0 9 10 12 30 6 20 6 60 3 30 0 90 0 Given this information, we can determine that rev: 06_20_2018 Multiple Choice Econlandia has a comparative advantage in the production of pies. Marketopia has a comparative advantage in the production of pies. Marketopia has a comparative advantage in the production of both goods. Neither bakery has a comparative advantage.

Answer 1

Answer: Marketopia has a comparative advantage in the production of pies.

Explanation:

The bakery with the comparative advantage in any of the goods is the one that has a lower opportunity cost in making it.

Marketopia.

Opportunity cost of Cookies = 18/30 pies = 0.6 pies

Opportunity cost of pies = 30/18 pies = 1.67 cookies

Econladia

Opportunity cost of Cookies = 9/90 pies = 0.1 pies

Opportunity cost of pies = 90/9 pies = 10 cookies

It is shown that Marketopia has a comparative advantage in the production of pies because the opportunity cost of such is 1.67 cookies as opposed to Econladia which is 10 cookies.