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6 December, 05:44

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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  1. 6 December, 07:12
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    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.
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