Suppose Firm A can manufacture 100 pens and 20 umbrellas with a unit of labor, and Firm B can manufacture 80 pens and 10 umbrellas with a unit of labor. Which one of the following statements is true? Firm A has the comparative advantage in both pen and umbrella production. Firm B has an absolute advantage in umbrella production. Firm A has a comparative advantage only in pen production. Firm B has a comparative advantage in pen production. Neither firm has a comparative advantage in either pen or umbrella production.

Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
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Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
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Suppose Firm A can manufacture 100 pens and 20 umbrellas with a unit of labor, and Firm B can manufacture 80 pens and 10 umbrellas with a unit of labor. Which one of the following statements is true?

Firm A has the comparative advantage in both pen and umbrella production.
Firm B has an absolute advantage in umbrella production.
Firm A has a comparative advantage only in pen production.
Firm B has a comparative advantage in pen production.
Neither firm has a comparative advantage in either pen or umbrella production.

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