Corinthia and Berylia both produce 5 million watches in a year.The opportunity cost of producing one watch is 2 shirts in Corinthia,while the opportunity cost of producing one watch is 3 shirts in Berylia.Which of the following statements is true in this case?

Question

Quizplus · Accepted Answer

Corinthia has a lower opportunity cost of producing watches as compared to Berylia. It only costs them 2 shirts to produce 1 watch while it costs Berylia 3 shirts to produce the same quantity. Therefore, Corinthia has the comparative advantage in producing watches. However, we cannot determine if Corinthia has an absolute advantage as the total production of both countries is the same.

Corinthia and Berylia Both Produce 5 Million Watches in a Year.The