Who has the comparative advantage in making fresh squeezed orange juice?

• A. Joe
• B. Carla
• C. No one

Answer: (B)

Verified step by step guidance

1. Identify the production possibilities for both Joe and Carla from the graphs. Joe can produce a maximum of 4 units of fresh squeezed orange juice or 4 scrambled eggs, and Carla can produce a maximum of 4 units of fresh squeezed orange juice or 8 scrambled eggs.
2. Calculate the opportunity cost for Joe to produce one unit of fresh squeezed orange juice. For Joe, the opportunity cost is the amount of scrambled eggs he forgoes, which is 1 scrambled egg per unit of orange juice.
3. Calculate the opportunity cost for Carla to produce one unit of fresh squeezed orange juice. For Carla, the opportunity cost is the amount of scrambled eggs she forgoes, which is 2 scrambled eggs per unit of orange juice.
4. Compare the opportunity costs calculated for Joe and Carla. Joe's opportunity cost is 1 scrambled egg per unit of orange juice, while Carla's is 2 scrambled eggs per unit of orange juice.
5. Determine who has the comparative advantage in making fresh squeezed orange juice. The person with the lower opportunity cost has the comparative advantage. In this case, Joe has the lower opportunity cost, so he has the comparative advantage in making fresh squeezed orange juice.