If two countries have differing opportunity costs of production for two goods, then: a) each country should specialise in the good for which it has a higher opportunity cost of production. b) only the country with an absolute advantage in the production of both goods stands to gain from trade. c) each country should purchase inputs from the other country in order to gain an absolute advantage. d) each country should specialise in the production of the good for which it has a comparative advantage. 1.23

If two countries have differing opportunity costs of production for two goods, then: a) each country should specialise in the good for which it has a higher opportunity cost of production. b) only the country with an absolute advantage in the production of both goods stands to gain from trade. c) each country should purchase inputs from the other country in order to gain an absolute advantage. d) each country should specialise in the production of the good for which it has a comparative advantage. 1.23

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following best explains the concept of "Comparative Advantage" in international trade? a) A country should produce goods in which it has an absolute advantage and trade for those where it does not. b) A country should only export goods and import nothing to maintain a positive trade balance. c) A country should specialize in the production of goods for which it has the lowest opportunity cost compared to other countries. d) A country should diversify its production across various sectors to avoid dependence on a single export commodity.
According to the "Principle of Comparative Advantage," a country should specialize in producing a good or service if it has:a) The highest opportunity cost b) The lowest opportunity cost c) The highest production cost d) The lowest production cost
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6. A) With the following data decide which country has comparative advantage for which good. Show your math. Good A Good B Country 1 300 30 Country 2 60 90 B) Using the data from above prove both countries can be better off trading with each other than if they do not trade. C) Why do we use comparative advantage to decide which country produces which good? Support your answer.