Question

2. Comparative and absolute advantage Darnell and Eleanor 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 (Bushels per acre) 12 15 Barley (Bushels per acre) 6 Darnell Eleanor On the following graph, use the blue line (circie symbol) to plot Darnell's production possiblibes frotier (PPF), and use the purple line (diamond symbol) to plot Eleanor's PPF

Answer 1

(a) Output table using 12 acres is as follows.

	Alfalfa	Barley
Darnell	12 x 12 = 144	6 x 12 = 72
Eleanor	15 x 12 = 180	5 x 12 = 60

(b) PPF

120 T 108T Darnell's PPF 面72 Eleanor's PPF ︶60 48 24 12 o 60 120 180 060 120 10 240 300 300 420 480 540 600 ALFALFA (Bushels)

(c) Eleanor has absolute advantage in alfalfa since she can produce more alfalfa than Darnell can (180 > 144) and Darnell has absolute advantage in barley since he can produce more barley than Eleanor can (72 > 60).

(d) Darnell's opportunity cost of barley is 2 alfalfa (= 144/72). Eleanor's opportunity cost of barley is 3 alfalfa (= 180/60). Because Darnell has lower opportunity cost in barley (2 < 3), Darnell has comparative advantage in barley and Eleanor has comparative advantage in alfalfa.