📚 Learning Guide
Absolute and Comparative Advantage
easy

If Country A can produce 10 units of wheat using the same resources that Country B uses to produce 5 units, which of the following best explains why Country A might still import wheat from Country B?

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Choose the Best Answer

A

Country A has an absolute advantage in wheat production but Country B can produce it at a lower opportunity cost.

B

Country A should produce only wheat and not engage in trade at all.

C

Country B has a higher total production capacity than Country A.

D

Country A lacks the resources to produce any wheat.

Understanding the Answer

Let's break down why this is correct

Answer

Country A can produce more wheat than Country B using the same resources, which shows it has an absolute advantage in wheat production. However, it might still choose to import wheat from Country B because of comparative advantage. This means that Country B could be better at producing something else that it can trade for wheat, making it more efficient overall. For example, if Country B can produce 10 units of corn while only using resources to produce 5 units of wheat, it might focus on corn and trade some of it for wheat from Country A. By doing this, both countries can benefit and get more of what they need.

Detailed Explanation

Country A can make more wheat than Country B. Other options are incorrect because This idea suggests Country A should only make wheat; This option wrongly assumes Country B can produce more overall.

Key Concepts

Absolute Advantage
Comparative Advantage
Topic

Absolute and Comparative Advantage

Difficulty

easy level question

Cognitive Level

understand

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