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 statements 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 may not have an absolute advantage in any particular product, but it may still have a comparative advantage in the production of some goods or services. In this case, the country manufactures high-quality bows and arrows, which suggests that it has a lower opportunity cost of producing those items compared to other goods or services. As a result, the new country should focus on producing and exporting bows and arrows to take advantage of its comparative advantage.

A New Country Is Formed in Central Africa