13
QuizMultiple Choice

N/A — Exam

Question 13 • Economics

Which situation is an example of comparative advantage in an international market?

Answer
A
Factories in Country A and Country B produce the same number of tablet computers. Country A’s factories could be used instead to build more laptops than the factories in Country B.
B
Country A can produce 100 units of rice per acre of farmland, while Country B can only produce 70 units of rice per acre of farmland using the same resources.
C
Country A decides to grow extra potatoes so they have more to export, while Country B does not grow potatoes to export.
D
Country A invests in a new technology while Country B chooses to invest in education.

Explanation

Comparative advantage means being able to produce a good at a lower opportunity cost than another producer. In choice A, the factories in Country A could produce more laptops instead of tablets than Country B’s factories could, indicating that Country A gives up more tablet production to make laptops and therefore has a comparative advantage in tablets. Choice B describes producing more with the same resources, which is an absolute advantage, not comparative advantage.

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