Question

The table below shows the production alternatives of Country A and Country B for producing computers and cars with equal amounts of resources that are fully and efficiently employed.

Which of the following is true according to the data in the table?
a. Country A has an absolute and comparative advantage in the production of computers.
b. Country B has an absolute and comparative advantage in the production of computers.
c. Country B should import computers and export cars.
d. Since Country B has an absolute advantage in the production of both goods, it will not trade with Country A.
e. Neither country can benefit from trade.

Answer 1

Without the specific data, the question of which country has an absolute or comparative advantage in producing computers and cars cannot be determined. However, even if Country B has an absolute advantage in both goods, they can trade with Country A if they have a comparative advantage in one of the products.

Step-by-step explanation:

The answer to the question lies in understanding the concepts of absolute advantage and comparative advantage in the context of international trade. Absolute advantage refers to when a country can produce more of a good with the same resources compared to another country. On the other hand, comparative advantage is when a country can produce a good at a lower opportunity cost than another country.

Without the specific data from the table, we cannot determine which country has an absolute or comparative advantage. However, it is important to note that even if Country B has an absolute advantage in the production of both goods, this does not prevent trade. Country B may still have a comparative advantage in producing one of the goods, meaning they could benefit from specializing in that good and trading with Country A for the other.