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QuizMultiple Choice

Comparative and Absolute Advantage

Question 1 • 2102320-Economics HONORS - Edgenuity Teacher

This table shows the production possibility schedule for several toothpaste companies. Toothpaste company Large tubes Small tubes 1 Sparkling 100 per hour 200 per hour 2 Bright White 100 per hour 250 per hour 3 Fresh! 200 per hour 250 per hour 4 Mmmint 150 per hour 150 per hour Use the numbers to place the companies in order of greatest comparative advantage to least comparative advantage in producing small tubes of toothpaste.

Answer
A
2, 1, 3, 4
B
1, 2, 3, 4
C
4, 3, 1, 2
D
2, 1, 4, 3

Explanation

Compare each company’s opportunity cost of producing small tubes: how many large tubes it gives up per small tube. Company 1 gives up 100 ÷ 200 = 0.5 large tubes; company 2 gives up 100 ÷ 250 = 0.4; company 3 gives up 200 ÷ 250 = 0.8; and company 4 gives up 150 ÷ 150 = 1. The lowest opportunity cost means the greatest comparative advantage, so the order is 2, 1, 3, 4: choice A.

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