Question 1 otu
3 points
suppose company a can produce shovels for $8 each, axes for 512 each, and
rakes for $15 each. company b can produce shovels for $10 each, axes for
$11 each, and rakes for $17 each. company a sells each item for $5 more
than its production cost. company b sells shovels for $13, axes for $15, and
rakes for $18
which of the following statements is true?
o
a. company b has a comparative advantage in the production of
shovels
b. company a has a comparative advantage in the production of
rakes
c. company has a comparative advantage in the production of
d. company a has a comparative advantage in the production of
< previous
og

B. Company A has a comparative advantage in the production of

rakes

Explanation:

Comparative advantage describes the ability of an enterprise to produce a particular product, goods, or services at a lower price in comparison to rivals. It means that the enterprise uses fewer inputs such as labor, capital, or land to produce. A company with a comparative advantage will manufacture more goods with the same quantity of inputs.

Company A produces rakes at $15 while company B produces at $17.  Company A, therefore, has a comparative advantage over company B in the production of rakes. It means company A use fewer resources rakes than company B. Company A can sell rakes at a lower price than company B.