Below is some hypothetical data for the countries of Canada and Mexico.(Assume that Canada has 10 million workers per month available and Mexico has 20 million. )
Canada's Production Possibilities
(Output in millions of bushels per month)
Mexico's Production Possibilities
(Output in millions of bushels per month)
Output Before Trade
(Output in millions of bushels per month)

-Suppose that a country has a comparative advantage in the production of wheat.Which of the following statements is true?

Question

Below is some hypothetical data for the countries of Canada and Mexico.(Assume that Canada has 10 million workers per month available and Mexico has 20 million. )
Canada's Production Possibilities
(Output in millions of bushels per month)
  Mexico's Production Possibilities
(Output in millions of bushels per month)
  Output Before Trade
(Output in millions of bushels per month)
 
-Suppose that a country has a comparative advantage in the production of wheat.Which of the following statements is true?

Quizplus · Accepted Answer

Comparative advantage means a country can produce a good at a lower opportunity cost than other countries, but it may not necessarily have an absolute advantage in production. Specialization is wise up to a point because of the law of increasing costs, which states that as a country specializes in the production of a good, the opportunity cost of producing that good increases, making it less efficient to produce more of it. The purchasing power parity theory and exchange rates do not necessarily have anything to do with comparative advantage.

Below Is Some Hypothetical Data for the Countries of Canada