Zach and Alex: Comparative Advantage in Furniture Production

What is the comparative advantage of Zach and Alex in furniture production?

Zach has a comparative advantage in the production of _________.

Alex has a comparative advantage in the production of __________.

Answer:

Zach has a comparative advantage in the production of tables.

Alex has a comparative advantage in the production of chairs.

Comparative advantage is a key concept in economics that refers to the ability of a country, individual, or company to produce a good or service at a lower opportunity cost than another. In this case, Zach has a comparative advantage in producing tables, which means he can produce tables at a lower opportunity cost compared to Alex. On the other hand, Alex has a comparative advantage in producing chairs.

When Zach specializes in producing tables and Alex specializes in making chairs, they can both benefit from their respective comparative advantages. By focusing on the production of the item they can produce most efficiently, they can increase overall productivity and output.

Through specialization based on their comparative advantages, Zach and Alex can trade their specialized goods with each other. This trade allows them to access a greater variety of goods and consume more than if they each tried to produce both tables and chairs on their own.