A new country is formed in central Africa. It has no absolute advantage in crude oil, diamonds, or wool. However, it does manufacture high-quality bows and arrows for specialized safari adventures. Which of the following statement is true?
A) The new country should try to produce its own crude oil, diamonds, and wool.
B) The new country has a comparative advantage in the production of bows and arrows.
C) The new country has an unqualified advantage in the production of bows and arrows.
D) The new country has a determined advantage in the production of arrows.
E) The new country is engaged in dumping bows and arrows.

Question

Quizplus · Accepted Answer

The new country has a comparative advantage in the production of bows and arrows since it can produce them at a lower opportunity cost compared to producing crude oil, diamonds, or wool. Therefore, it should focus its resources and efforts on producing and exporting high-quality bows and arrows, while importing goods that it has a higher opportunity cost in producing.

A New Country Is Formed in Central Africa