Assume that China has a comparative advantage in producing corn and exports corn to Japan.We can conclude that
A)China also has an absolute advantage in producing corn relative to Japan.
B)China has a lower opportunity cost of producing corn relative to Japan.
C)Japan has an absolute disadvantage in producing corn relative to China.
D)labor costs are higher for corn producers in Japan than in China.

Question

Quizplus · Accepted Answer

Comparative advantage is based on lower opportunity cost. Therefore, if China is exporting corn to Japan, it means that China has a lower opportunity cost of producing corn relative to Japan. This does not necessarily mean that China has an absolute advantage in producing corn or that Japan has an absolute disadvantage. The given information is not sufficient to determine the relative labor costs in the two countries.

Assume That China Has a Comparative Advantage in Producing Corn