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Chapter 20: Q4. (page 430)

Suppose that the opportunity-cost ratio for sugar and almonds is 4S 鈮� 1A in Hawaii but 1S 鈮� 2A in California. Which state has the comparative advantage in producing almonds?

  1. Hawaii

  2. California

  3. Neither

Short Answer

Expert verified

The correct option is: b) California

Step by step solution

01

Step 1. Explanation

Comparative advantage is having a lower opportunity cost in the production of a commodity than others.

The opportunity cost of producing almonds in Hawaii will be 4 units of sugar (=4/1 sugar), and in California will be 1/2 unit of sugar (=1/2 sugar). California has a lower opportunity cost in the production of almonds. Thus, California has a comparative advantage in the production of almonds.

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