Answer: Ana should produce more fudge, and Leo should produce more toffee.
Step-by-step explanation:
Comparative advantage defined: A person or country has a comparative advantage producing a good if their opportunity cost for it is lower than someone else's.
In this case, Ana and Leo will both benefit if they focus on the product for which they have the lower opportunity cost.
(a) Ana’s production possibilities:
If she spends all her time making fudge: 3 pounds; or toffee: 2 pounds.
Opportunity cost of 1 pound fudge = 2/3 = 0.66 pounds toffee
Opportunity cost of 1 pound toffee = 3/2 = 1.5 pounds fudge
(b) Leo’s production opportunities:
All time making fudge: 4 pounds; or toffee: 5 pounds.
Opportunity cost of 1 pound fudge = 5/4 = 1.25 pounds toffee
Opportunity cost of 1 pound toffee = 4/5 = 0.8 pounds fudge
Since Ana’s opportunity cost for fudge is lower than Leo’s, she should specialize in fudge production.
Conversely, Leo has a lower opportunity cost for toffee, so he should focus on producing toffee.
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