If Country A can produce an extra plane by giving up two boats, and Country B can produce an extra plane by giving up three boats, then
A) Country A would like to trade with B, but B cannot gain by trading with A.
B) Country A has an absolute advantage in producing planes and a comparative advantage in producing boats.
C) Country A has a comparative advantage over Country B in the production of planes.
D) the two countries have no incentive to trade with one another.
E) Country B has a comparative advantage over Country A in the production of planes.

Question

Quizplus · Accepted Answer

Country A has a lower opportunity cost of producing planes because it only has to give up two boats, while Country B has to give up three boats to produce an extra plane. Therefore, Country A has a comparative advantage in producing planes, while Country B has a comparative advantage in producing boats. This creates an opportunity for mutually beneficial trade between the two countries.

If Country a Can Produce an Extra Plane by Giving