Question

The production possibilities for country X are either 6,000 bushels of soybeans or 10,000 bushels of wheat. The production possibilities for country Y are either 2,000 bushels of soybeans or 4,000 bushels of wheat. Which of the following is true?A. Country Y should specialize in the growing of soybeans according to the principle of comparative advantage.
B. Country X is the least-cost producer of wheat.
C. The domestic opportunity cost of wheat production is lower in country Y.
D. The high cost producer of soybeans is country X.

Answer 1

Answer:

The correct answer is option A.

Explanation:

The country X can produce either 6,000 bushels of soybeans or 10,000 bushels of wheat.  

The country Y can produce either 2,000 bushels of soybeans or 4,000 bushels of wheat.  

The opportunity cost of producing soybeans for country X

= $\frac{What\ is\ sacrificed}{what\ is\ gained}$

= $\frac{6,000}{10,000}$

= 0.6

The opportunity cost of producing soybeans for country Y

= $\frac{What\ is\ sacrificed}{what\ is\ gained}$

= $\frac{2,000}{4,000}$

= 0.5

Since, the opportunity cost for country Y is lower we can say that it has a comparative advantage in producing soybeans and specializes in its production.