Question

Suppose that in an hour Chip can gather 8 pounds of fruit or 4 pounds of nuts. In an hour, Monk can gather 9 pounds of fruit or 3 pounds of nuts. _______ should specialize in gathering nuts.

a) Monkb) Chipc) Neither Chip nor Monkd) Both Chip and Monk

Answer 1

b) Chip

Step-by-step explanation:

According to the law of comparative advantage, a person or country should specialise in the production of goods and services for which it has a lower opportunity cost when compared with other countries or people.

Chip's opportunity cost in gathering nuts = 8 / 4 = 2

Monk's opportunity cost in gathering nuts = 9 / 3 = 3

Chip has a lower comparative advantage and should specialise in the production of nuts.

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