Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year.Country A has 200 workers.Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year.Country B has 400 workers.The workers in Country A should specialize in __________________ because they possess the ___________________ in the production of that good.
A) bananas; comparative advantage
B) tomatoes; comparative advantage
C) bananas; absolute advantage
D) tomatoes; absolute advantage

Question

Quizplus · Accepted Answer

To determine which good each country should specialize in, we need to compare their opportunity costs. The opportunity cost is what each country has to give up to produce one additional unit of the other good. In Country A, one worker can produce either 25 bananas or 5 tomatoes each year, which means that the opportunity cost of producing one tomato is 5 bananas. In Country B, one worker can produce either 18 bananas or 6 tomatoes each year, which means that the opportunity cost of producing one tomato is 3 bananas. Therefore, Country B has a lower opportunity cost for producing tomatoes, and Country A has a lower opportunity cost for producing bananas. This means that Country A has a comparative advantage in producing bananas, and Country B has a comparative advantage in producing tomatoes. Therefore, workers in Country A should specialize in producing bananas.

Suppose That a Worker in Country a Can Make Either