Chapter 1R, Problem 13MCQ

To determine

The question requires us to determine the name of tribes which have absolute advantage and comparative advantage in producing meatballs.

Explanation of Solution

After the discovery of new technology in Frivoli, the new table will be:

Tribe	Spaghetti in pounds	Meatballs in pounds
Tivoli	30	50
Frivoli	40	60

From the above table, Frivoli is producing more meatballs in absolute terms. So, Frivoli will have an absolute advantage in producing meatballs.

To determine the comparative advantage, we need to calculate the opportunity cost.

In Tivoli, the opportunity cost of producing meatballs = 30/50 = 0.6 units of spaghetti.

In Frivoli, the new opportunity cost of producing meatballs = 40/60 = 0.66 pounds of spaghetti.

The opportunity cost of producing meatballs is still lower in Tivoli. So, Tivoli will have a comparative advantage in producing meatballs while Frivoli will have an absolute advantage in producing meatballs.

Thus, the option “d” is correct.

Economics Concept Introduction

1. The country with a lower opportunity cost of producing a product will have a comparative advantage in producing that product.
2. The country with high production of a product in absolute terms will have an absolute advantage in producing that product.