Question

Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate that:________

A. If Canada were to allow trade, it would export hockey sticks.
B. Canada has an absolute advantage, relative to other countries, in producing hockey sticks
C. Canada has a comparative advantage, relative to other countries, in producing baseball bats.
D. All of the above are correct.

Answer 1

A. If Canada were to allow trade, it would export hockey sticks

Step-by-step explanation:

A Comparative advantage is said to exist when one nation sacrifices fewer resources than another to produce same quantity of a product. It means the nation with lower opportunity cost (in terms of units of production of other good sacrificed), than others, holds a comparative advantage.

In the given case, Canada sacrifices fewer (i.e 5 bats against 8 bats) units of baseball bats to produce a hockey stick, than other nations.

This means Canada holds a comparative advantage relative to other countries, in production of hockey sticks.

Hence, if Canada were to allow trade, it would export hockey sticks.