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a. Who has a comparative advantage in producing muffins? In scones?

b. Now suppose Harry and Meghan decide to specialize according to comparative advantage and each produce one good (the good in which they have a comparative advantage).

- Harry will bake ______ muffins and ______ scones.
- Meghan will bake ______ muffins and ______ scones.

Answer :

Harry has a comparative advantage in producing muffins, while Meghan has a comparative advantage in producing scones. This is because Harry can produce 18 muffins in the same amount of time it takes Meghan to produce 10 muffins. Similarly, Meghan can produce 20 scones in the same amount of time it takes Harry to produce 24 scones.

Comparative advantage is the ability of an individual or a business to produce a good or service at a lower opportunity cost than another individual or business. Opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. In this case, Harry has a lower opportunity cost for producing muffins than Meghan, and Meghan has a lower opportunity cost for producing scones than Harry.

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