If country A can produce either 1,000 bushels of wheat or 500 bushels of rice with 1 unit of resources while country B can produce 600 bushels of wheat or 400 bushels of rice with 1 unit of resources,country
A) B must give up fewer bushels of rice to get 1 unit of wheat than country A.
B) B must have an absolute advantage in wheat production.
C) A should specialize in the production of both wheat and rice because trade with B would yield no benefit.
D) A must sacrifice less wheat to produce 1 unit of rice than country B.
E) B has a comparative advantage in rice production.

Question

Quizplus · Accepted Answer

Country B has a lower opportunity cost of producing rice compared to country A, as it only needs to give up 1.5 units of wheat to produce 1 unit of rice compared to country A giving up 2 units of wheat to produce 1 unit of rice. Therefore, country B has a comparative advantage in rice production, meaning it should specialize in producing rice and trade with country A for wheat.

If Country a Can Produce Either 1,000 Bushels of Wheat