Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Country A should specialize in wine, Country B in cheese
B
Both countries should produce wine
C
Country A should specialize in cheese, Country B in wine
D
Both countries should equally produce both goods
Understanding the Answer
Let's break down why this is correct
Answer
Comparative advantage means that a country should specialize in producing the goods it can make most efficiently compared to other goods. In this case, country A can produce 10 units of wine or 5 units of cheese, which means it gives up 2 units of wine for each unit of cheese produced. On the other hand, country B can produce 6 units of wine or 2 units of cheese, giving up 3 units of wine for each unit of cheese. Since country A has a lower opportunity cost for cheese, it should specialize in cheese, while country B has a lower opportunity cost for wine and should specialize in wine. This way, both countries can trade and benefit from each other's strengths.
Detailed Explanation
Country A can make more wine with its resources than cheese. Other options are incorrect because This idea suggests both countries can make wine equally well; This option assumes Country A is better at cheese, but it's not.
Key Concepts
Comparative Advantage
Opportunity Cost
International Trade
Topic
Comparative Advantage Analysis
Difficulty
medium level question
Cognitive Level
understand
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