Final answer:
Kim has a comparative advantage in growing apples if his opportunity cost of producing apples is lower than Ruth's. In the scenario of Mary and Raj, to maximize earnings, cooperation is the preferred choice if it can be assured. Otherwise, individual risk assessment dictates their decision, exemplifying the prisoner's dilemma.
Step-by-step explanation:
To determine if Kim has a comparative advantage in growing apples, we need to consider the opportunity costs for both Kim and Ruth. The principle of comparative advantage states that a person has a comparative advantage in producing a good if their opportunity cost of producing that good is lower than for others. For Kim to have a comparative advantage in growing apples, Kim's opportunity cost of producing apples must be less than Ruth's opportunity cost of producing apples.
Considering Mary and Raj, if Raj is sure that Mary will cooperate, the best choice for him is to also cooperate and lower output to earn $150. If Mary believes that Raj might cheat, her best choice, to safeguard against the worst outcome, would be to work independently, guaranteeing her $100 rather than risking earning $0. This scenario is a classic example of the prisoner's dilemma, where individual incentives can undermine the mutually beneficial outcome of cooperation. In a scenario where cooperation can be ensured, both parties would prefer to cooperate and lower output, maximizing their earnings at $150 each.
Examining production capabilities and opportunity costs can reveal which producers have a comparative or absolute advantage in specific goods. For example, Bangladesh has a comparative advantage in producing garments over milk compared to the U.S. because it has a lower opportunity cost for producing garments.