Question

2. Comparative and absolute advantage

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

	Corn	Rye
	(Bushels per acre)	(Bushels per acre)
Shen	18	6
Valerie	28	7

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

_______ has an absolute advantage in the production of corn, and _______  has an absolute advantage in the production of rye.

Shen's opportunity cost of producing 1 bushel of rye is _______ bushels of corn, whereas Valerie's opportunity cost of producing 1 bushel of rye is _______  bushels of corn. Because Shen has a _______  opportunity cost of producing rye than Valerie, _______  has a comparative advantage in the production of rye, and _______  has a comparative advantage in the production of corn.

Answer 1