Question

10 mark for review the table below shows the production alternatives of country a and country b for producing computers and cars with equal amounts of resources that are fully and efficiently employed. country computers cars a 24 0 0 12 b 45 0 0 15 which of the following is true according to the data in the table? a country a has an absolute and comparative advantage in the production of computers. b country b has an absolute and comparative advantage in the production of computers. c country b should import computers and export cars. d since country b has an absolute advantage in the production of both goods, it will not trade with country a. e neither country can benefit from trade.

Explanation:

Step1: Calculate opportunity - cost of computers in Country A

The opportunity - cost of 1 computer in Country A is $\frac{12}{24}=0.5$ cars.

Step2: Calculate opportunity - cost of computers in Country B

The opportunity - cost of 1 computer in Country B is $\frac{15}{45}=\frac{1}{3}\approx0.33$ cars.

Step3: Determine absolute advantage

Country B can produce more computers (45) than Country A (24) with the same resources, so Country B has an absolute advantage in computer production.

Step4: Determine comparative advantage

Since the opportunity - cost of producing computers is lower in Country B ($\frac{1}{3}$ cars per computer) than in Country A (0.5 cars per computer), Country B has a comparative advantage in computer production.

Answer:

B. Country B has an absolute and comparative advantage in the production of computers.