Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year.Country A has 100 workers.Suppose a worker in Country B can make either 2 iPods or 10 tablets each year.Country B has 200 workers.Which of the following is true?
A)Country B should produce tablets and Country A should produce iPods,and they could benefit from trade.
B)Country B should produce iPods and Country A should produce tablets,and they could benefit from trade.
C)Neither country can benefit from trade since no comparative advantage exists.
D)Because Country B has the absolute advantage tablets,they should specialize in the production of tablets.

Question

Quizplus · Accepted Answer

Country A has a comparative advantage in producing iPods since they can produce 10 iPods per worker per year compared to only 2 iPods per worker per year in Country B. Country B has a comparative advantage in producing tablets since they can produce 10 tablets per worker per year compared to only 5 tablets per worker per year in Country A. Therefore, if Country A specializes in producing iPods and Country B specializes in producing tablets, they can benefit from trade by exchanging these goods with each other. Country A can trade some of their excess iPods for Country B's excess tablets, and both countries will end up with more of both goods than they would have without trade.

Suppose That a Worker in Country a Can Make Either