I am stumped with this question...help please Charles and Dina are farmers. Each

Question

I am stumped with this question...help please

Charles and Dina are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of alfalfa and barley each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing alfalfa or barley or to produce alfalfa on some of the land and barley on the rest.

Alfalfa

Barley

(Bushels per acre)

(Bushels per acre)

On the following graph, use the blue line (circle symbol) to plot Charles's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Dina's PPF.

Charles’s PPFDina’s PPF06012018024030036042048054060012010896847260483624120BARLEY (Bushels)ALFALFA (Bushels)480, 24Y-Intercept: 36X-Intercept: NoneSlope: 0

has an absolute advantage in the production of alfalfa, and has an absolute advantage in the production of barley.

Charles's opportunity cost of producing 1 bushel of barley isbushels of alfalfa, whereas Dina's opportunity cost of producing 1 bushel of barley isbushels of alfalfa. Because Charles has a opportunity cost of producing barley than Dina, has a comparative advantage in the production of barley, and has a comparative advantage in the production of alfalfa.

Alfalfa

Barley

(Bushels per acre)

(Bushels per acre)

Explanation / Answer

Absolute Advantage:

Absolute advantage is the ability of a country to produce a good or service at a lower per unit cost as compared to any other country that produces same good or service.

Dina is able to produce more units of Alfalfa so Dina has an absolute advantage in the production of Alfalfa.

Dina is also able to produce more units of Barley so Dina has an absolute advantage in the production of Barley.

Comparative Advantage

Charles:

18 Alfalfa = 6 Barley

1 Alfalfa = 6/18 = 0.33 Barley

1 Barley = 18/6 = 3 Alfalfa

Opportunity cost of 1 Alfalfa is 0.33 Barley and 1 barley is 3 Alfalfa.

Dina:

28 Alfalfa = 7 Barley

1 Alfalfa = 7/28 = 0.25 Barley

1 Barley = 28/7 = 4 Alfalfa

Opportunity cost of 1 Alfalfa is 0.25 Barley and 1 Barley is 4 Alfalfa.

Opportunity cost of Alfalfa is lower when it is produced by Dina. So, Dina has comparative advantage in the production of Alfalfa. Opportunity cost of Barley is lower when it is produced by Charles. So, Charles has comparative advantage in the production of Barley.

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