📚 Learning Guide
Absolute and Comparative Advantage
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If Country A can produce 50 tons of rice or 100 tons of wheat, and Country B can produce 30 tons of rice or 90 tons of wheat, which country has a comparative advantage in rice production?

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Choose the Best Answer

A

Country A

B

Country B

C

Neither country

D

Both countries have equal advantage

Understanding the Answer

Let's break down why this is correct

Answer

To determine which country has a comparative advantage in rice production, we need to look at how much of each crop each country gives up to produce rice. Country A can produce 50 tons of rice or 100 tons of wheat, so for every ton of rice, it gives up 2 tons of wheat. On the other hand, Country B can produce 30 tons of rice or 90 tons of wheat, meaning it gives up 3 tons of wheat for every ton of rice. Since Country A gives up fewer tons of wheat per ton of rice produced, it has a comparative advantage in rice production. Thus, Country A should focus on producing rice while Country B should focus on wheat to make the most efficient use of their resources.

Detailed Explanation

Country B has a lower opportunity cost for rice. Other options are incorrect because Some might think Country A is better because it makes more rice; This choice suggests neither country is better at rice.

Key Concepts

Comparative Advantage
Opportunity Cost
Absolute Advantage
Topic

Absolute and Comparative Advantage

Difficulty

medium level question

Cognitive Level

understand

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