Suppose that a worker in Country A can make either 15 cars or 5 computers each year. Country A has 1,000 workers. Suppose a worker in Country B can make either 4 cars or 20 computers each year. Country B has 600 workers. _____ has a comparative advantage at producing cars, and _____ has a comparative advantage at producing computers.
A) Country A; Country B
B) Country B; Country A
C) Country A; Country A
D) Country B; Country B

Question

Quizplus · Accepted Answer

To determine which country has a comparative advantage at producing a good, we need to compare the opportunity cost of producing that good in each country. Country A can produce 1 car by giving up the production of 1/3 (5/15) of a computer. Country B can produce 1 car by giving up the production of 5 computers. Therefore, Country A has a lower opportunity cost of producing cars than Country B, which means Country A has a comparative advantage at producing cars. Similarly, Country A can produce 1 computer by giving up the production of 3 cars, while Country B can produce 1 computer by giving up the production of 1/5 (4/20) of a car. Therefore, Country B has a lower opportunity cost of producing computers than Country A, which means Country B has a comparative advantage at producing computers.

Suppose That a Worker in Country a Can Make Either