Suppose Paraguay can produce 12 wheat or 3 corn.Suppose Bolivia can produce 4 wheat or 2 corn.Suppose opportunity costs are constant.Given these production possibilities,
A)Paraguay has a comparative advantage in wheat.
B)Paraguay has a comparative advantage in corn.
C)Paraguay has a comparative advantage in both goods.
D)Paraguay has an absolute advantage in neither good.

Question

Quizplus · Accepted Answer

Paraguay has a lower opportunity cost for producing wheat. It can produce 4 wheat for the cost of 1 corn, while Bolivia can only produce 2 wheat for the cost of 1 corn. Therefore, Paraguay has a comparative advantage in producing wheat.

Suppose Paraguay Can Produce 12 Wheat or 3 Corn