Question

econ Suppose that the United States can make 15 cars or 20 bottles of wine with one year's worth of labor. France can make 10 cars or 18 bottles of wine with one year's worth of labor. From these numbers, we can conclude that Select one: a. the United States has a comparative advantage in the production of cars. b. France has a comparative advantage in the production of wine. c. the United States has an absolute advantage in the production of cars. d. All of the above are correct.

Answer 1

d. All of the above are correct.

Step-by-step explanation:

A country has comparative advantage in production if it produces at a lower opportunity cost when compared with other countries.

A country has absolute advantage in the production of a good or service If it produces more quantity of the good when compared with other countries.

USA produces more quantities of both bottles of wine and cars, so it has an absolute advantage in the production of both goods

USA's opportunity cost in the production of wine = 15 / 20 = 0.75

USA's opportunity cost in the production of cars = 20 / 15 = 1.333

France's opportunity cost in the production of wine = 10 / 18 = 0.56

France's opportunity cost in the production of cars = 18 / 10 = 1.8

France has a comparative advantage in the production of wine while USA has a comparative advantage in production of cars.

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