Question

assume a simple model with only two countries: china and russia, and two goods: rice and vodka. suppose that the opportunity cost for china to produce 1 unit of vodka is 3 units of rice and the opportunity cost for russia to produce 1 unit of vodka is 1/2 unit of rice. which of the following statements is true?

Answer 1

Russia has a comparative advantage in vodka production as it has a lower opportunity cost, losing only 1/2 unit of rice per unit of vodka, while China's opportunity cost for producing vodka is higher, at 3 units of rice.

Step-by-step explanation:

The question provided deals with the concept of opportunity cost and comparative advantage in international trade, involving China and Russia, with their production of rice and vodka. To determine which statement is true regarding the opportunity costs given, we analyze the data: China's opportunity cost of producing 1 unit of vodka is 3 units of rice, while Russia's opportunity cost for producing 1 unit of vodka is 1/2 unit of rice.

Russia has a comparative advantage in producing vodka because it sacrifices less rice to do so. Therefore, Russia should specialize in vodka production, while China, with a higher opportunity cost for vodka, should specialize in rice production assuming no other costs are involved.