Which company has the comparative advantage in cost per pound of coffee?
| Whole Sale Company | Cost per lb. |
| :---------------------- | :----------- |
| Café con Leche | $8.50 |
| Beans Brothers | $7.50 |
| Colombian Co. | $11.25 |
| Turkish Coffee Company | $6.25 |
A. Café con Leche
B. Beans Brothers
C. Colombian Co.
D. Turkish Coffee Company
Answer (2)
Identify the cost per pound for each company.
Determine the minimum cost per pound among all companies.
The company with the minimum cost per pound has the comparative advantage.
Turkish Coffee Company has the comparative advantage with a cost of $6.25 .
Explanation
Understanding the Problem We are given a table of wholesale coffee companies and their cost per pound. Our goal is to determine which company has the comparative advantage in cost per pound of coffee. In this context, comparative advantage means the company with the lowest cost per pound.
Listing the Costs To find the company with the comparative advantage, we need to identify the minimum cost per pound from the given data. The costs per pound for each company are as follows:
Café con Leche: $8.50
Beans Brothers: $7.50
Colombian Co.: $11.25
Turkish Coffee Company: $6.25
Identifying the Minimum Cost By comparing the costs, we can see that the Turkish Coffee Company has the lowest cost per pound at $6.25. Therefore, the Turkish Coffee Company has the comparative advantage in cost per pound of coffee.
Examples
Understanding comparative advantage is crucial in business and economics. For instance, if you're starting a coffee shop, knowing which supplier offers the lowest cost per pound allows you to maximize your profit margin. This concept extends beyond coffee; it applies to any scenario where you need to minimize costs, such as sourcing materials, hiring services, or even choosing between different investment opportunities. Identifying and leveraging comparative advantages helps businesses make informed decisions and stay competitive in the market.
The Turkish Coffee Company has the comparative advantage in cost per pound of coffee since it offers the lowest price of $6.25. By comparing the costs of all the companies, it's clear that no other company can provide coffee at a lower rate. Therefore, the answer is the Turkish Coffee Company.
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