Exhibit B-1 below shows the quantity of thing-a-ma-jigs or truffala fruit that can be produced by each country, if all of its resources are devoted to that product.

-Canary Island, in Exhibit B-1, does not have a comparative advantage in the production of either product.

Question

Exhibit B-1 below shows the quantity of thing-a-ma-jigs or truffala fruit that can be produced by each country, if all of its resources are devoted to that product.
 
-Canary Island, in Exhibit B-1, does not have a comparative advantage in the production of either product.

Quizplus · Accepted Answer

Comparative advantage is determined by which country or entity can produce a good at a lower opportunity cost compared to others. Even if Canary Island is less efficient in producing both products compared to another entity, it could still have a comparative advantage in the production of one product over the other if its opportunity cost of producing that product is lower. Comparative advantage encourages entities to specialize in the production of goods where they have a lower opportunity cost, leading to more efficient global resource allocation.

Exhibit B-1 Below Shows the Quantity of Thing-A-Ma-Jigs or Truffala