Suppose two countries each produce wool and cotton.The country with the lower opportunity cost for cotton (in terms of wool)is said to have

Question

Quizplus · Accepted Answer

The country with the lower opportunity cost for cotton (in terms of wool) has a comparative advantage in the production of cotton. This means that they can produce cotton at a lower opportunity cost (in terms of giving up wool production) than the other country. Therefore, it is more efficient for this country to specialize in cotton production and trade with the other country for wool, utilizing their comparative advantage.

Suppose Two Countries Each Produce Wool and Cotton