Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day.A Bangladeshi worker,on the other hand,can produce 100 pairs of gloves or grow 200 radishes per day.Which of the following statements is true?
A)Bangladesh should specialize in glove production since it possesses the comparative advantage in glove production.
B)Bangladesh should specialize in radish production since it possesses the comparative advantage in radish production.
C)Bangladesh should only produce gloves since it has the absolute advantage in glove production.
D)Bangladesh should only produce radishes since it has the absolute advantage in radish production.

Question

Quizplus · Accepted Answer

Comparative advantage refers to the ability of a country to produce a particular good at a lower opportunity cost compared to another country. In this case, Bangladesh has a lower opportunity cost in producing gloves since it can produce 100 pairs of gloves by sacrificing only 2 radishes, whereas the US can produce 50 pairs of gloves by sacrificing 6 radishes. On the other hand, Bangladesh can produce 1 radish by sacrificing only 0.5 pairs of gloves, whereas the US can produce 1 radish by sacrificing 1 pair of gloves. Therefore, Bangladesh should specialize in producing gloves to trade with the US, who should specialize in producing radishes. This way, both countries can benefit from the gains of trade by consuming more of both goods at a lower opportunity cost.

Suppose an American Worker Can Make 50 Pairs of Gloves