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

Question

Quizplus · Accepted Answer

Bangladesh should specialize in glove production because it has a lower opportunity cost in producing gloves than in producing radishes. This means that by specializing in glove production, Bangladesh can produce more gloves at a lower opportunity cost than if it tried to produce both gloves and radishes. Meanwhile, the American worker should specialize in radish production since they have a lower opportunity cost in producing radishes than in producing gloves. This results in both countries being able to trade with each other and benefit from their comparative advantages.

Suppose an American Worker Can Make 50 Pairs of Gloves