Assume that there are only two countries, and , that produce only two goods, and . The table below shows labour hours required in each country to produce a unit of each good :
| Good A | Good B | |
|---|---|---|
| Country X | 55 | 65 |
| Country Y | 45 | 40 |
Which of the following statements is correct?
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Assume that there are only two countries, X and Y, that produce only two goods, A and B. The table below shows labour hours required in each country to produce a unit of each good: | Good A | Good B | Country X | 55 | 65 | Country Y | 45 | 40 | Which of the following statements is correct? (A) Country Y has a comparative advantage in producing both goods. (B) Country X has a comparative advantage in producing good A. (C) The two countries should not trade since country Y produces both goods using less quantities of labour. (D) None of the above
Theories of international trade has come up 151 times in 6 exams since 2006.
This question is on Absolute and comparative advantage, part of Theories of international trade in International Economics.
Why countries trade: producing more cheaply in absolute terms, or at lower opportunity cost.
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Question from the JNU SSS 2016 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.