If country A can produce 5 shirts or 4 pounds of beef in a day and country B can produce 10 shirts or 12 pounds of beef in a day, then country A has a comparative advantage in producing shirts.

Question

Quizplus · Accepted Answer

In order to determine which country has a comparative advantage in producing shirts, we need to compare the opportunity costs of producing shirts for each country. The opportunity cost is the amount of one good that has to be given up in order to produce more of the other good.

For country A, the opportunity cost of producing 1 shirt is 4/5 pounds of beef. For country B, the opportunity cost of producing 1 shirt is 12/10 = 6/5 pounds of beef.

Since country A has a lower opportunity cost of producing shirts (meaning they have to give up less beef in order to produce shirts), they have a comparative advantage in producing shirts.

If Country a Can Produce 5 Shirts or 4 Pounds