Using the same amount of resources, the United States and Canada can both produc
ID: 1123645 • Letter: U
Question
Using the same amount of resources, the United States and Canada can both produce lumberjack shirts and lumberjack boots, as shown in the production possibilities frontiers in the figure to the right. 40 38 36PPF Canada 34 32 30 O 28 The United States has a comparative advantage in producing lumberjack boots 24 20 E 16 12 has a comparative advantage in producing Canada lumberiack shirts Does either country have an absolute advantage in producing both goods? A. Neither country has an absolute advantage in both goods PPFus US because Canada can produce more boots but 2 O B. Both countries have an absolute advantage in both goods ° C. Canada has an absolute advantage in both goods because D. Neither country has an absolute advantage in both goods the United States can produce more shirts because they both produce boots and shirts it can produce more boots and more shirts because the United States can produce more boots but 0 2 4 6 8 101214 1618202224 2628303234 363840 Quantity of boots made Canada can produce more shirts 0 E. The United States has an absolute advantage in both goods because it can produce more boots and more shirtsExplanation / Answer
21. US
Opportunity cost of producing boots = 1/6 shirts
Opportunity cost of producing shirt = 6 boots
CANADA
Opportunity cost of producing boots = 9 shirts
Opportunity cost of producing shirt = 1/9 shirts
US will produce boots as its opportunity cost of producing boots is less than that of Canada
And Canada will produce shirts as its opportunity cost of producing shirts is less than that of US.
No firm has absolute advantage in both goods. OPTION D
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