Scenario: Foodland and Drinkland
Two countries, Foodland and Drinkland, produce food and drinks. In Foodland, one resource unit produces 20 tons of food and one resource unit produces 10 tons of drinks. In Drinkland, one resource unit produces 12 tons of food and one resource unit produces 24 tons of drinks.
Food Drinks
Foodland 20 10
Drinkland 12 24
-Which of the following is a true statement about the above scenario?
A) Foodland has a comparative advantage in producing drinks.
B) Drinkland cannot trade with Foodland because trade is too expensive.
C) Drinkland has an absolute advantage in producing drinks.
D) Foodland should stop producing food and drinks and instead produce widgets.
Correct Answer:
Verified
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