The table below shows units of wheat and cloth produced by each worker per day in both the countries.Table 20.1

-For purposes of determining comparative advantage, the cost of producing a good in each of two countries is measured in terms of:

Question

The table below shows units of wheat and cloth produced by each worker per day in both the countries.Table 20.1
 
-For purposes of determining comparative advantage, the cost of producing a good in each of two countries is measured in terms of:

Quizplus · Accepted Answer

The cost of producing a good in each of two countries is measured in terms of opportunity costs. Opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. In this case, the opportunity cost of producing wheat in Country A is giving up the production of cloth while the opportunity cost of producing cloth in Country A is giving up the production of wheat. The same applies to Country B. By comparing the opportunity costs of each country, we can determine which country has a comparative advantage in producing wheat or cloth.

The Table Below Shows Units of Wheat and Cloth Produced