Mexico and Canada produce both oil and apples using labour only. A barrel of oil is produced with 4 hours of labour in Mexico and 8 hours of labour in Canada. A bushel of apples is produced with 8 hours of labour in Mexico and 12 hours of labour in Canada. Canada has
A)an absolute advantage in oil production.
B)an absolute advantage in apple production.
C)a comparative advantage in oil production.
D)a comparative advantage in apple production.
E)a comparative advantage in oil production and a comparative advantage in apple production.

Question

Quizplus · Accepted Answer

Canada has a comparative advantage in apple production because it has a lower opportunity cost for producing apples compared to oil, relative to Mexico.

Mexico and Canada Produce Both Oil and Apples Using Labour