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Explore TopicChoose the Best Answer
A
Country A produces 10 tons of rice and 20 tons of wheat, Country B produces 5 tons of rice and 15 tons of wheat.
B
Country A produces 15 tons of rice and 5 tons of wheat, Country B produces 10 tons of rice and 10 tons of wheat.
C
Country A produces 20 tons of rice and 10 tons of wheat, Country B produces 30 tons of rice and 20 tons of wheat.
D
Country A produces 5 tons of rice and 25 tons of wheat, Country B produces 10 tons of rice and 20 tons of wheat.
Understanding the Answer
Let's break down why this is correct
Answer
Comparative advantage means that each country should produce the good for which it has the lowest opportunity cost, even if one country can make everything more efficiently. For example, imagine Country A can produce 10 cars or 5 bottles of wine in a day, while Country B can produce 5 cars or 10 bottles of wine; A’s opportunity cost of a car is 0. 5 bottles, B’s is 2 bottles. Thus Country A should specialize in cars and Country B in wine, because each faces a lower cost producing its chosen good. After specialization, they can trade and both end up with more cars and wine than if they tried to make everything themselves.
Detailed Explanation
The first country can produce rice with fewer sacrificed wheat than the second country, so its opportunity cost of rice is lower. Other options are incorrect because People often think the country that makes more of everything has an advantage, but that is absolute advantage; This option shows a country with more overall production, but the trade‑off between goods is not examined.
Key Concepts
Comparative Advantage
Absolute Advantage
Opportunity Cost
Topic
Production Advantage
Difficulty
easy level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1Which scenario best illustrates how comparative advantage can lead to mutual benefits in international trade agreements?
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Practice
2
Question 2Which of the following statements accurately describe the concepts of Absolute and Comparative Advantage in production? Select all that apply.
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3
Question 3Which of the following scenarios best illustrates the concept of specialization and trade?
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Practice
4
Question 4Which scenario best illustrates the principle of profit maximization for a firm?
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Practice
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