Two countries X and Y both produce mobile phones and corn.
The quantity of the two goods produced by both countries when they divide their resources equally between the two goods is shown in the table below.
What can be concluded from this information?
Select ONE answer:
- Country X has the comparative advantage in the production of corn.
- Country Y has the absolute advantage in the production of corn.
- Trade would benefit Country Y but not Country X.
- Trade would not benefit either country.
Show your workings to arrive at your answer, and explain and justify your reasons:……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple choice question is suitable for Economics KS5 classes.
The answer is 4
- Country X has the absolute advantage in producing corn but there is no comparative advantage as its opportunity cost of producing one unit of corn is the same as in Country Y i.e. 1⁄4 mobile phone,
- Country Y does not have the absolute advantage in producing corn.
- Trade would benefit neither country. They could each get the same number of extra mobile phones by shifting resources internally.
- Correct: There is no comparative advantage in this case. The opportunity cost of producing 1 mobile phone is 4 units of corn in both countries.
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