Consider two countries, Country A and Country B. Country A can produce 10 units of wine or 5 units of cloth with the same resources. Country B can produce 6 units of wine or 3 units of cloth. Which of the following classifications accurately reflects their comparative advantages and why?

To understand comparative advantage, we look at how efficiently each country can produce wine and cloth. Country A can produce more of both items compared to Country B, but we should focus on the opportunity cost of producing one good over the other. For Country A, producing 1 unit of cloth means giving up 2 units of wine, while for Country B, producing 1 unit of cloth means giving up 2 units of wine as well. However, since Country A can produce more units overall, it has a comparative advantage in producing wine, while Country B has a comparative advantage in cloth, as it gives up less wine per unit of cloth produced. Therefore, both countries benefit by specializing in what they produce most efficiently and trading with each other.