Question

Suppose Hank and Tony can both produce corn. If Hank's opportunity cost of producing a bushel of corn is 2 bushels of soybeans and Tony's opportunity cost of producing a bushel of corn is 3 bushels of soybeans, then Hank has the comparative advantage in the production of corn.True / False.

Answer 1

True

Step-by-step explanation:

Opportunity cost refers to the advantage foregone of the second non chosen alternative when the first alternative is chosen wherein a choice had to be made between those 2 alternatives.

Opportunity cost is simply defined as the next best alternative.

In the given case, both Hank and Tony produce corn. But Tony foregoes more bushels of soybean than Hank so as to produce same level of corn as Hank.

This implies, Hank has competitive advantage over Tony in production of corn.