Suppose Dairy Ice Cream and Creamy Cones both produce ice cream. Dairy Ice Cream can produce 100 gallons per day, while Creamy Cones can produce 80 gallons per day. Based on this information, which manufacturer has the absolute advantage in ice cream production?

• A. Creamy Cones
• B. Dairy Ice Cream
• C. Neither has an absolute advantage
• D. Both have the same absolute advantage

Answer: (B)

Verified step by step guidance

1. Understand the concept of absolute advantage: it refers to the ability of a producer to produce more of a good or service with the same amount of resources compared to another producer.
2. Identify the production quantities given: Dairy Ice Cream produces 100 gallons per day, and Creamy Cones produces 80 gallons per day.
3. Compare the production levels directly since absolute advantage is about who can produce more output.
4. Determine which producer has the higher production quantity, indicating the absolute advantage.
5. Conclude that the producer with the higher output (in this case, Dairy Ice Cream) has the absolute advantage in ice cream production.