A third country,Funland,also produces food and drinks.In Funland,one resource unit produces 8 tons of food and 6 tons of drinks.Which of the following is true about Funland,Foodland,and Drinkland?

Question

Quizplus · Accepted Answer

To determine comparative advantage, we need to calculate the opportunity cost of producing food and drinks in Funland.

One resource unit in Funland can produce 8 tons of food and 6 tons of drinks. Therefore, the opportunity cost of producing one ton of food is 6/8 or 0.75 tons of drinks, and the opportunity cost of producing one ton of drinks is 8/6 or 1.33 tons of food.

In comparison, Foodland has an opportunity cost of 1 ton of drinks for every 1 ton of food, while Drinkland has an opportunity cost of 1 ton of food for every 2 tons of drinks.

Based on the above analysis, Funland has a lower opportunity cost for producing food compared to producing drinks, which means it has a comparative advantage in producing food. Therefore, option B is the correct answer.

A Third Country,Funland,also Produces Food and Drinks