📚 Learning Guide
Understanding Comparative Advantage
easy

If Country A can produce 10 cars or 5 trucks and Country B can produce 4 cars or 8 trucks, which country has a comparative advantage in producing trucks?

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Choose the Best Answer

A

Country A because it can produce more trucks overall

B

Country B because it has a lower opportunity cost for trucks

C

Neither country has a comparative advantage

D

Both countries can produce trucks equally well

Understanding the Answer

Let's break down why this is correct

Answer

To determine which country has a comparative advantage in producing trucks, we need to look at how many trucks each country can produce compared to cars. Country A can make 5 trucks or 10 cars, meaning for every truck it gives up, it can make 2 cars. On the other hand, Country B can produce 8 trucks or 4 cars, so for each truck it gives up, it only gives up half a car. Since Country B sacrifices fewer cars for each truck it produces, it has a comparative advantage in making trucks. Therefore, Country B should focus on producing trucks, while Country A should focus on cars.

Detailed Explanation

Country B has a lower opportunity cost for making trucks. Other options are incorrect because Some might think more trucks mean a better ability to produce; The idea that neither country has an advantage is incorrect.

Key Concepts

Comparative Advantage
Opportunity Cost
Absolute Advantage
Topic

Understanding Comparative Advantage

Difficulty

easy level question

Cognitive Level

understand

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