Question

Tom and Jerry have two tasks to do all day: make dishes and build fences. If Tom spends all day making dishes, he will make 16 dishes. If he instead devotes his day to building fences, Tom will build 4 fences. If Jerry spends his day making dishes, he will make 14 dishes; if he spends the day building fences, he will build 7 fences. Because Tom has a ____________ opportunity cost for one fence compared to Jerry, we know Tom has _________________________.

Answer 1

Answer: higher

No comparative advantage

Step-by-step explanation:

For tom -

The opportunity cost for making dishes : 4 / 16 = 0.25

The opportunity cost for making fences : 16 / 4 = 4

For Jerry :

The opportunity cost for making dishes = 7 / 14 = 0.5

The opportunity cost for making fences : 14 / 7 = 2

Comparative advantage in the production of a good or service occurs when a person/ country has lower opportunity cost in the production of a good or service.

Opportunity cost is the cost of giving up one activity in order to carry out another activity.

Opoortunty cost = activity sacrificed/ activity carried out.

In the production of fence, Tom has a higher opportunity cost (4) when compared to jerry (2) in the production of fence.