Table 13-6

Denmark and Belize can produce both clocks and hats.Table 13-6 shows the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 13-6.Which country has a comparative advantage in producing clocks?

Question

Table 13-6

Denmark and Belize can produce both clocks and hats.Table 13-6 shows the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 13-6.Which country has a comparative advantage in producing clocks?

Quizplus · Accepted Answer

To determine which country has a comparative advantage in producing a good, we need to compare their opportunity costs. The opportunity cost of producing one clock for Denmark is 2 hats (given that they can produce 20 clocks if they use all their resources to produce clocks and 40 hats if they allocate all resources to produce hats - 20/40 = 0.5). On the other hand, Belize's opportunity cost of producing one clock is 4 hats (given that they can produce 10 clocks if they use all their resources to produce clocks and 30 hats if they allocate all resources to produce hats - 10/30 = 0.33). Therefore, Denmark has a higher opportunity cost of producing hats and a lower opportunity cost of producing clocks, which means they have a comparative advantage in clock production.

Table 13-6 Denmark and Belize Can Produce Both Clocks and Both