Imagine two countries with identical endowments of resources. Using all its resources, Broland can produce 5,000 books or 8,000 forks. Using the same resources, Nomia can produce 4,000 books or 7,000 forks. Which country has a comparative advantage producing books?

Question

Quizplus · Accepted Answer

Broland gives up 1.6 forks for each book (8000/5000), while Nomia gives up 1.75 forks for each book (7000/4000). Broland has a lower opportunity cost in terms of forks given up per book, thus has a comparative advantage in producing books.

Imagine Two Countries with Identical Endowments of Resources