Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.On the other hand,a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day.When trade opens up,the United States should produce:
A) both goods, since they have an absolute advantage in both goods, and not trade.
B) only shoes, since they have a comparative advantage in the production of shoes, and not trade.
C) apples, since they have a comparative advantage in the production of apples, and not trade.
D) only apples, since they have a comparative advantage in the production of apples, and trade for shoes.

Question

Quizplus · Accepted Answer

The United States has a comparative advantage in producing apples since they can produce 5 apples per pair of shoes while Canada can only produce 2 apples per pair of shoes. Therefore, the US should specialize in producing apples and trade with Canada for shoes. This will lead to gains from trade for both countries.

Suppose an American Worker Can Make 20 Pairs of Shoes