Question

Using all his resources, jordan can make 50 units of good x or 25 units of good y. using all her resources, ashley can make 45 units of good x or 15 units of good y. for good x, ________ has an absolute advantage and ________ has comparative advantage.

Answer 1

Jordan has an absolute advantage in producing good X, while Ashley has a comparative advantage in producing good X because Ashley's opportunity cost is lower.

Step-by-step explanation:

For good X, Jordan has an absolute advantage because he can produce more of it than Ashley using all his resources. Absolute advantage is measured by the total output a person or entity can produce using the same resources. In this case, Jordan can make 50 units of good X compared to Ashley's 45 units. To determine who has the comparative advantage, one needs to consider the opportunity cost of producing good X in terms of how much of good Y must be given up.

Jordan's opportunity cost of making one unit of good X is 1/2 unit of good Y (25 units of Y / 50 units of X), while Ashley's opportunity cost is 1/3 unit of good Y (15 units of Y / 45 units of X). Since Ashley gives up less of good Y to produce one more unit of good X, Ashley has the comparative advantage for good X.