Figure 1. An Example of China-U.S. Trade Possibilities
-Considering Figure 1, prior to trade the production of textiles and aircraft for both China and the U.S.are 19 and 9.Which of the following represents the pre-trade situation?
A) China has a comparative advantage in the production of textiles and the U.S. has a comparative advantage in the production of aircraft.
B) China has a comparative advantage in the production of aircraft and the U.S. has a comparative advantage in the production of textiles.
C) China has an absolute advantage in the production of both textiles and aircraft.
D) The U.S. has an absolute advantage in the production of both textiles and aircraft.

Question

Figure 1. An Example of China-U.S. Trade Possibilities 
-Considering Figure 1, prior to trade the production of textiles and aircraft for both China and the U.S.are 19 and 9.Which of the following represents the pre-trade situation?
A) China has a comparative advantage in the production of textiles and the U.S. has a comparative advantage in the production of aircraft. 
B) China has a comparative advantage in the production of aircraft and the U.S. has a comparative advantage in the production of textiles. 
C) China has an absolute advantage in the production of both textiles and aircraft. 
D) The U.S. has an absolute advantage in the production of both textiles and aircraft.

Quizplus · Accepted Answer

China has a comparative advantage in textiles if it can produce them at a lower opportunity cost than the U.S., while the U.S. has a comparative advantage in aircraft if it can produce them at a lower opportunity cost than China.

Figure 1 an Example of China-U