Question

In Latuna, it takes 10 resources to produce 1 ton of coffee and 13.5 resources to produce 1 ton of wheat. In South Narnia, it takes 40 resources to produce 1 ton of coffee and 12 resources to produce 1 ton of wheat. Latuna has a comparative advantage over South Narnia in:__________.

A. wheat
B. neither coffee nor wheat.
C. both coffee and wheat.
D. coffee
E. both coffee and wheat if combined.

Answer 1

A

Step-by-step explanation:

a person has comparative advantage in production if he / she produces at a lower opportunity cost when compared to other countries.

for latuna,

opportunity cost of producing 1 ton of coffee = 13.5 / 10 = 1.35

opportunity cost of producing 1 ton of wheat = 10 / 13.5 = 0.741

for South Narnia,

opportunity cost of producing 1 ton of coffee = 12 / 40 =0.3

opportunity cost of producing 1 ton of wheat = 3.3

south narnia has a comparative advantage in the production of coffee and latuna has a comparative advantage in the production of wheat