The Joy of Potato Peeling and Onion Slicing!
Which of the following statements is true?
A. Doward's opportunity cost of peeling one potato is 6/5 of an onion.
B. Shashawna has an absolute advantage in both activities.
C. Doward has a comparative advantage in potato peeling.
D. Shashawna has a comparative advantage in onion slicing.
E. Shashawna's opportunity cost of peeling one potato is 6/5 of an onion.
Final Answer:
In this scenario, Shashawna has an absolute advantage in both potato peeling and onion slicing. However, Doward has a comparative advantage in potato peeling because the opportunity cost of him peeling a potato is lower compared to Shashawna.
The subject question pertains to the concepts of absolute advantage and comparative advantage in Economics. Absolute advantage refers to the ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group. Comparative advantage, on the other hand, refers to the ability of an individual or group to produce a particular good or service at a lower opportunity cost than other goods or services.
Using this understanding, let's analyze the statements: Shashawna peels more potatoes and slices more onions per hour than Doward, hence Shashawna has an absolute advantage in both activities.
Doward's opportunity cost of peeling one potato is 4/3 of an onion (calculated by taking his onion slicing ability (20) and dividing it by his potato peeling ability (15)). Therefore, statement A is incorrect. Shashawna's opportunity cost of peeling one potato is 5/6 of an onion (25 onions divided by 30 potatoes), which makes statement E incorrect.
Between Doward and Shashawna, the person with the lower opportunity cost for peeling potatoes will have the comparative advantage. Here Doward has a lower opportunity cost per potato (4/3 of an onion, compared to Shashawna's 5/6 of an onion). So, Doward has a comparative advantage in potato peeling.