Multiple Choice
When a country has a comparative advantage in the production of a good, which of the following is true?
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2. Introductory Economic Models
PPF - Comparative Advantage and Absolute Advantage
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Who has the absolute advantage in making fresh squeezed orange juice?
A
Joe
B
Carla
C
No One
Verified step by step guidance1
Identify the concept of absolute advantage: It refers to the ability of an individual or group to produce a good more efficiently than another individual or group.
Examine the production possibility frontiers (PPFs) for Joe and Carla. The PPFs show the maximum possible output combinations of two goods that can be produced with available resources and technology.
Look at the endpoints of each PPF on the vertical axis, which represents the maximum amount of fresh squeezed orange juice each can produce if they devote all resources to it.
For Joe, the maximum amount of fresh squeezed orange juice is 4 units, as indicated by the vertical intercept of his PPF.
For Carla, the maximum amount of fresh squeezed orange juice is 5 units, as indicated by the vertical intercept of her PPF. Since Carla can produce more fresh squeezed orange juice than Joe, she has the absolute advantage in making fresh squeezed orange juice.
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