Question

Suppose that Argentina and Chile are both engaged in the production of copper and wheat, and that Argentina has an absolute advantage in the production of both goods. If Chile has a comparative advantage in the production of copper, then Chile..."

a. Should focus on wheat production.
b. Should focus on copper production.
c. Has no comparative advantage.
d. Should stop production altogether.

Answer 1

If Chile has a comparative advantage in the production of copper, it should focus on copper production.

Step-by-step explanation:

In this scenario, if Chile has a comparative advantage in the production of copper, it should focus on copper production. Comparative advantage refers to the ability of a country to produce a good at a lower opportunity cost than another country. Since Chile has a comparative advantage in copper, it means that Chile can produce copper at a lower opportunity cost compared to Argentina. Therefore, Chile should focus on copper production and trade with Argentina for wheat, where Argentina has an absolute advantage.