Question

Suppose two countries, A and B, produce only two goods, computers and beans. Country A

has an opportunity cost of 200 pounds of beans for every computer it makes, and country B
has an opportunity cost of 500 pounds of beans for every computer.
Which statements support the theory of comparative advantage?
Choose exactly two answers that are correct.

A: Country A has a comparative advantage in the production of computers.
B: Country A has a comparative advantage in the production of beans.
C: Country B should export computers to country A.
D: Country B should import computers from country A.

Answer 1

Correct Answer:

Country B should import computers from country A.

Country A has a comparative advantage in the production of computers.

Step-by-step explanation:

Answer 2

Letter A and Letter D are correct.

Comparative advantage is the ability of a country to produce services and goods for a lower opportunity cost if compared to its trade partners. The Comparative Advantage Theory states that a country should always specialize in the production of products or services that have a lower opportunity cost for them. In this situation, Country A has a comparative advantage in the production of computer, therefore Country B should import computers from country A.