📚 Learning Guide
Comparative and Absolute Advantage
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Country A can produce either 10 tons of rice or 5 tons of wheat with its resources, while Country B can produce either 15 tons of rice or 10 tons of wheat. Which category does Country A belong to regarding comparative advantage, and why?

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Learning Path

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Choose the Best Answer

A

Absolute Advantage in Rice - Country A can produce more rice than Country B.

B

Comparative Advantage in Wheat - Country A has a lower opportunity cost for producing wheat.

C

No Advantage - Country A has no comparative or absolute advantage over Country B.

D

Comparative Advantage in Rice - Country A has a lower opportunity cost for producing rice.

Understanding the Answer

Let's break down why this is correct

Answer

To understand which category Country A belongs to regarding comparative advantage, we first look at the production possibilities of both countries. Country A can produce either 10 tons of rice or 5 tons of wheat, while Country B can produce 15 tons of rice or 10 tons of wheat. Country A has an opportunity cost of 2 tons of rice for every ton of wheat it produces, since giving up 10 tons of rice allows it to produce 5 tons of wheat. On the other hand, Country B has an opportunity cost of 1. 5 tons of rice for each ton of wheat.

Detailed Explanation

Country A gives up less when it produces rice. Other options are incorrect because Some might think Country A is better at making rice; This option suggests Country A is better at wheat.

Key Concepts

Comparative Advantage
Absolute Advantage
Opportunity Cost
Topic

Comparative and Absolute Advantage

Difficulty

medium level question

Cognitive Level

understand

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