Assume Aaron and Jose each own a small ranch and each produces milk and cheese.

Question

Assume Aaron and Jose each own a small ranch and each produces milk and cheese. One of them is better than the other at producing both milk and cheese (but we don't know who). Which of the statements below cannot be true regarding absolute or comparative advantage?

Jose could have a comparative advantage in producing cheese.

Aaron could have an absolute advantage in producing milk.

Aaron could have a comparative advantage in producing both milk and cheese.

ose could have an absolute advantage in producing cheese.

Jose could have an absolute advantage in producing both milk and cheese.

Explanation / Answer

Ans: Aaron could have a comparative advantage in producing both milk and cheese.

Explanation: One person can not have a comparative advantage in producing both the goods. One may have absolute advantage but not comparative advantage in producing both the goods.

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