In one castle Mario can stomp 5 goombas or collect 20 coins

In one castle, Mario can stomp 5 goombas or collect 20 coins. In that same castle, Luigi can stomp 10 goombas or collect 30 coins. Mario’s opportunity cost of 1 goomba is ______ coin(s). Luigi’s opportunity cost of 1 goomba is ______ coin(s). ______ has a comparative advantage in stomping goombas.

1/4; 1/3; Mario

1/4; 1/3; Luigi

4; 3; Mario

4; 1/4; Mario

4; 3; Luigi

Solution

Answer : Option E is correct.

According to the given information,

For Mario, 5 goombas = 20 coins as instead of 5 goombas Mario can get 20 coins. So, 1 goombas = 20/5 = 4 coins. This means that Mario can get 4 coins instead of 1 goombas. Therefore, Mario\'s opportunity cost for 1 goombas is 4 coins.

For Luigi, 10 goombas = 30 coins as Luigi can get 30 coins instead of 10 goombas. So, 1 goombas = 30/10 = 3 coins . This means that Luigi can get 3 coins instead of 1 goombas. Therefore, Luigi\'s opportunity cost for 1 goombas is 3 coins.

According to the comparative advantage theory, if a person / country has lower opportunity cost in comparison to others than the person / country has the comparative advantage. From the above discussion it is clear that for 1 goombas stomping Luigi has lower opportunity cost in comparison to Mario. Therefore, Luigi has comparative advantage in this case.