Assume that Falda and Varick can switch between producing wheat and producing cl

Question

Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate.

Refer to Table 3-30. Falda has a comparative advantage in the production of

wheat.

cloth.

both goods.

neither good.

a.

wheat.

b.

cloth.

c.

both goods.

d.

neither good.

Table 3-30 Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate Bushels of Wheat Yards of Cloth 12 15 Refer to Table 3-30. Falda has a comparative advantage in the production of O a. wheat. O b. cloth O c. both goods. d. neither good.

Explanation / Answer

a. Wheat

Falda's opportunity cost of producing wheat is 12/8= 1.5

Varick's opportunity cost of producing wheat is 15/6= 2.5

Falda's opportunity cost of producing wheat is lower. So Falda has comparative advantage in producing wheat.

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