Question

Country A can produce 10 units of cloth or 5 units of wine in a day. Country B can produce 6 units of cloth or 4 units of wine in a day. Which country has the comparative advantage in the production of cloth and wine?

Q: Answer-Country A can produce 10 units of cloth or 5 units of wine in a day. Country B can produce 6 units o...

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 510 0.5 units of wine Opportunity cost of 1 unit of wine 105 2 units of cloth Country B Opportunity cost of 1 unit of cloth 46 0.67 units of wine Opportunity cost of 1 unit of wine 64 1.5 units of cloth Comparative Advantage Country A Lower opportunity cost in producing cloth 0.5 lt 0.67 Country B Lower opportunity cost in producing wine 1.5 lt 2 C Country A has the comparative advantage in cloth, and Country B has the comparative advantage in wine.