If the United States can produce 50 airplanes and 50,000 shirts in one year,while Mexico can produce 5 airplanes and 15,000 shirts,then:

Question

Quizplus · Accepted Answer

The United States has an absolute advantage in producing both airplanes and shirts, but that does not mean that trade cannot be mutually beneficial. The concept of comparative advantage suggests that even if a country can produce all goods more efficiently than another country, it still benefits from specializing and trading in the goods where it has a relatively lower opportunity cost (comparative advantage). In this case, the United States has a comparative advantage in producing airplanes (since it can produce one airplane at the cost of producing only 1,000 shirts, while Mexico must give up 3,000 shirts to produce one airplane), and Mexico has a comparative advantage in producing shirts (since it can produce one shirt at the cost of producing only 0.000333 airplanes, while the United States must give up producing two airplanes to produce one shirt). By trading, both countries can consume more of each good than they could produce alone, leading to higher total welfare.

If the United States Can Produce 50 Airplanes and 50,000