opportunity costs are the same in the two countries.

Question

Quizplus · Accepted Answer

From the given information, we know that the price of a ton of grain in Country A is $200, while in Country B it is $250. Therefore, if Country A produces a ton of grain, it can sell it for $200, while if Country B produces a ton of grain, it can sell it for $250.

We also know that the opportunity cost of producing a ton of grain in Country A is 2 cars, while in Country B it is 3 cars. This means that in order for Country A to produce a ton of grain, it has to give up the opportunity to produce 2 cars, while in Country B it has to give up the opportunity to produce 3 cars.

Given this information, we can conclude that the opportunity cost of producing a ton of grain is higher in Country B than in Country A. Therefore, if both countries specialize in the production of the good in which they have a comparative advantage, they will both benefit from the trade. Country B will export grain to Country A, while Country A will export cars to Country B.

Option 1 is not correct, as we do not have enough information to determine the absolute advantage of either country in the production of cars or grain. Option 2 is correct, as explained above. Option 3 is only partially correct, as it does not take into account the fact that the opportunity cost of producing a ton of grain is different in the two countries.

Opportunity Costs Are the Same in the Two Countries