Question

The chart shows a production possibilities schedule for Sabrina’s Soccer.



Stan’s Sporting Goods is a competitor that can manufacture seven soccer balls out of a possible ten, if it makes one soccer net. Which statement correctly compares the two businesses?

Sabrina’s Soccer has a comparative advantage over Stan’s Sporting Goods because Sabrina’s Soccer has a lower opportunity cost.
Stan’s Sporting Goods has a comparative advantage over Sabrina’s Soccer because Stan’s Sporting Goods has a lower opportunity cost.
Sabrina’s Soccer has an absolute advantage over Stan’s Sporting Goods because Sabrina’s Soccer has a lower production cost.
Stan’s Sporting Goods has an absolute advantage over Sabrina’s Soccer because Stan’s Sporting Goods has a lower production cost.

Answer 1

Sabrina’s Soccer has a comparative advantage over Stan’s Sporting Goods because Sabrina’s Soccer has a lower opportunity cost.

Reason: Stan gives up 3 soccer balls to make one net (10 → 7), while Sabrina gives up fewer balls to make one net, so Sabrina has the lower opportunity cost and thus the comparative advantage.