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 could produce 4,000 books or 7,000 forks. Which country has a comparative advantage producing forks?

Question

Quizplus · Accepted Answer

To determine which country has a comparative advantage in producing forks, we need to compare the opportunity cost of producing forks between the two countries. Broland gives up 0.625 books (5,000 books/8,000 forks) for each fork produced, while Nomia gives up 0.571 books (4,000 books/7,000 forks) for each fork produced. Since Nomia has a lower opportunity cost of producing forks, it has a comparative advantage in producing forks.

Imagine Two Countries with Identical Endowments of Resources