Country A can produce 10 units of cloth or 5 units of

Solution

Comparative advantage is determined by comparing the opportunity costs of producing goods between countries. Opportunity Cost Calculation:

• Country A:
• Opportunity cost of 1 unit of cloth = 5/10 = 0.5 units of wine
• Opportunity cost of 1 unit of wine = 10/5 = 2 units of cloth
• Country B:
• Opportunity cost of 1 unit of cloth = 4/6 = 0.67 units of wine
• Opportunity cost of 1 unit of wine = 6/4 = 1.5 units of cloth

• Country A:
• Lower opportunity cost in producing cloth (0.5 < 0.67)
• Country B:
• Lower opportunity cost in producing wine (1.5 < 2)