Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Country A specializes in wine and Country B specializes in cheese, leading to increased overall production and potential trade benefits.
B
Both countries produce both goods equally to ensure they have enough of each.
C
Country A produces cheese because it has a higher quantity of resources.
D
Country B cannot benefit from trade because it produces less of both goods than Country A.
Understanding the Answer
Let's break down why this is correct
Answer
When we talk about comparative advantage, we look at which country can produce a good at a lower opportunity cost. In this case, Country A can produce wine more efficiently than cheese, as it gives up fewer cheese units to make wine compared to Country B. Specifically, Country A gives up 0. 5 units of cheese for each unit of wine, while Country B gives up 1. 5 units of cheese for each unit of wine.
Detailed Explanation
Country A can make more wine than cheese, while Country B is better at making cheese. Other options are incorrect because Some might think both countries should split their efforts equally; It's a common mistake to think more resources mean better production of everything.
Key Concepts
Comparative Advantage
International Trade
Opportunity Cost
Topic
Comparative Advantage Analysis
Difficulty
medium level question
Cognitive Level
understand
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