For each watch that Switzerland produces,it gives up the opportunity to make 50 pounds of chocolate.Germany can produce 1 watch for every 100 pounds of chocolate it produces.Which of the following is true about the comparative advantage between the two countries?
A)Switzerland has the comparative advantage in chocolate.
B)Switzerland has the comparative advantage in watches.
C)Germany has the comparative advantage in watches and chocolate.
D)Germany has the comparative advantage in watches.

Question

Quizplus · Accepted Answer

Since Switzerland gives up 50 pounds of chocolate to produce one watch, it has a higher opportunity cost of producing watches compared to Germany, which can produce 1 watch for every 100 pounds of chocolate it produces. Therefore, Switzerland has a comparative advantage in producing chocolate while Germany has a comparative advantage in producing watches.

For Each Watch That Switzerland Produces,it Gives Up the Opportunity