Introduction to Economics 2 Deneme Sınavı Sorusu #755062
Let’s assume a hypothetical world with two countries, namely Sunland and Lakeland. So as to provide simplicity for the analysis, it is assumed that the countries are producing only two commodities, corn and Wheel under increasing opportunity costs.For Lakeland, the absolute disadvantage in corn production (4) is greater than the absolute disadvantage in wheel production (1,6).
If this is the case which of the following statement can be said ?
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Sunland has no comparative advantage |
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Lakeland has a comparative advantage in the production of corn |
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Sunland has a comparative advantage in the production of Wheel. |
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Lakeland has a comparative advantage in the production of Wheel. |
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Lakeland has no comparative advantage. |
We can determine the comparative advantage of Lakeland by comparing the absolute disadvantages in the production of corn and wheel. For Lakeland, the absolute disadvantage in corn production (4) is greater than the absolute disadvantage in wheel production (1,6). In other words, the absolute disadvantage is smaller in Wheel production for Lakeland, meaning that Lakeland has a comparative advantage in the production of wheel. In this case, Sunland has a comparative advantage in the production of corn.
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