If Country A can produce an extra plane by giving up two boats,and Country B can produce an extra plane by giving up three boats,then
A)Country A has an absolute advantage in producing planes and a comparative advantage in producing boats.
B)Country B has a comparative advantage over Country A in the production of planes.
C)Country A has a comparative advantage over Country B in the production of planes.
D)the two countries have no incentive to trade with one another.
E)Country A would like to trade with B,but B cannot gain by trading with A.

Question

Quizplus · Accepted Answer

Comparative advantage is based on the opportunity cost of producing a good. Since Country A has a lower opportunity cost of producing planes (2 boats) compared to Country B (3 boats), Country A has a comparative advantage in plane production. Therefore, it would be beneficial for Country A to specialize in plane production and trade with Country B for boats.

If Country a Can Produce an Extra Plane by Giving