C ww mcmlanh gherede naunchpadku man els acro5e8291408/H et launchpalte module p
ID: 1131822 • Letter: C
Question
C ww mcmlanh gherede naunchpadku man els acro5e8291408/H et launchpalte module pa kugar el maco eE982 boda47850297d4ccett4e er_ y DoreQuiz- Chapter 2 2. (Table: Wheet and Aluminum) Use Table: Wheat and Aluminum. The United States and Germany can produce both wheat and eluminum. The table shows the maximum anrual output combinations of wheat and aluminum that can be produced, Based on the table Wheat and Aluni US Wheat 50 Germw.y has an obsolute advertage n umnum a comparative adventage in wheat Germany has a comparative advantage in aluminum and an atsolute advantage in aluminum the United States has a comprative advantage in both alumnam and wheat. the United States has a comparative advantage in wheat and an absoluto advantage in wheat. Remaining: 17:33 Start: 11:0Explanation / Answer
Answer
The correct answer is (d) The United States has a comparative Advantage in Wheat and an Absolute Advantage in wheat.
We can see from the table above that with given resources US can produce 100 unit of wheat while Germany can produce only 50 units. Hence US can produce more wheat hence US has absolute advantage in producing wheat.
In order for US to produce 100 unit of wheat, US has to sacrifice 100 units of aluminium. So in order to produce 1 unit of wheat, US has to sacrifice 100/100 = 1 unit of Aluminimum. hence Opportunity cost of US for producing 1 unit of wheat is 1 unit of Aluminium.
In order for Germany to produce 50 unit of wheat, Germany has to sacrifice 100 units of aluminium. So in order to produce 1 unit of wheat, Germany has to sacrifice 100/50 = 2 unit of Aluminimum. hence Opportunity cost for producing 1 unit of wheat is 2 units of Aluminium.
Hence Opportunity Cost is lesser for US (=1) in comparison to Germany(=2). Hence US has Comparative Advantage in Producing Wheat.
Hence the correct answer is (d) The United States has a comparative Advantage in Wheat and an Absolute Advantage in wheat.
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