If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then Select one:

a. Iowa has an absolute advantage in the production of corn.

b. Iowa has a comparative advantage in the production of corn.

c. Oklahoma should produce just enough corn to satisfy its own residents' demands.

d. Iowa should import corn from Oklahoma.

Question

Tiana Mckinney

Business

18 March, 03:49

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then Select one:

a. Iowa has an absolute advantage in the production of corn.

b. Iowa has a comparative advantage in the production of corn.

c. Oklahoma should produce just enough corn to satisfy its own residents' demands.

d. Iowa should import corn from Oklahoma.

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Answers (1)

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Alonzo · Answer 1

b. Iowa has a comparative advantage in the production of corn.

Explanation:

Iowa's opportunity cost of corn means, for Iowa, the value of the products they need to give up in order to produce corn.

For example, given 2 crops, corn and banana, which have equal price.

Given the fixed amount of resources, to produce a ton of corn, Iowa has to give up 0.5 ton of banana, while Oklahoma has to give up 1 ton of banana. This means Iowa's opportunity cost of corn is lower that that of Oklahoma so Iowa has a comparative advantage in the production of corn.