Suppose that the United States and Italy are considering trade in two products: grain and oranges. Suppose that before trade, the United States produces 800 million bushels of grain and 200 million bushels of oranges. At the same time, Italy produces 200 million bushels of grain and 100 million bushels of oranges. Which statement regarding comparative advantage is true?

Question

Quizplus · Accepted Answer

Italy has a comparative advantage in producing oranges only because it produces fewer oranges relative to grain compared to the United States, indicating a lower opportunity cost for oranges.

Suppose That the United States and Italy Are Considering Trade