France and Japan have the same-sized labor force. Suppose French workers can pro

Question

France and Japan have the same-sized labor force. Suppose French workers can produce 2 cars per year, and Japanese workers can produce 10 cars per year. Suppose French workers can produce 1 sailboat per year, and Japanese workers can produce 2 sailboats per year. Which of the following is true?

France has a comparative advantage in producing sailboats.

France has a comparative advantage in producing cars.

France has an absolute advantage in producing both goods.

France has neither a comparative or absolute advantage at producing either.

Explanation / Answer

France:

Opportunity cost of producing car = 1/2 = 0.5 sailboats

Opportunity cost of producing sailboat = 2 cars

Japanese:

Opportunity cost of producing car = 2/10 = 1/5 = 0.2 sailboats

Opportunity cost of producing sailboat = 10/2 = 5 cars

France's opportunity cost of producing sailboat is less than that of Japan. Therefore, it has comparative advantage in producing sailboat

OPTION A

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