Question

select the correct answer. the united states and france both produce sweaters and caps. suppose that a us worker can produce 50 caps per hour or 1 sweater per hour and a french worker can produce 40 caps per hour and 2 sweaters per hour. based on this scenario, which statement is true? a. the united states has a comparative advantage producing caps. b. france has a comparative advantage producing caps. c. the united states has a comparative advantage producing sweaters. d. neither country has a comparative advantage producing either good.

Explanation:

Comparative advantage is determined by lower opportunity - cost. The opportunity cost for a US worker to produce 1 cap is $\frac{1}{50}$ sweaters, and for a French worker to produce 1 cap is $\frac{2}{40}=\frac{1}{20}$ sweaters. Since $\frac{1}{50}<\frac{1}{20}$, the US has a lower opportunity - cost of producing caps, so it has a comparative advantage in cap production.

Answer:

A. The United States has a comparative advantage producing caps.