Answer to Question #226220 in Microeconomics for Raksha

Question

Country A Country B

No. of pencils 100 50

produced

pounds of paper

produced 150 150

Country A and Country B can both produce paper and pencils, according to the table above and using the same amount of time and resources. Which country has the absolute advantage in producing each good?

Country A has absolute advantage in pencils, but neither country has absolute advantage in paper

Country A has absolute advantage in both

Country B has absolute advantage in both

Country B has absolute advantage in paper, but Country A has absolute advantage in pencils

Neither country has absolute advantage in either good

Answer 1

The correct answer is option a. Country A has absolute advantage in pencils, but neither country has absolute advantage in paper

(i) Country A can produce 100 number of pencils which is more than the number of pencils which country B produces (50). 

Country B produces 50 pencils which is less than 100 pencils (produced by country A). So, country A produces more number of pencils (100 > 50) and has an absolute advantage in producing pencils.

So, country A has absolute advantage in producing pencils.

(ii) Country A can produce 150 pounds of papers which is equal to the pounds of paper produced by country B.

Country B produces 150 pounds of paper and country A also produces the same quantity (150). So, none of the country has an absolute advantage in producing paper.

So, neither country has an absolute advantage in producing paper.

 

So, Country A has absolute advantage in pencils, but neither country has absolute advantage in paper

 

Other options are incorrect because they have wrong advantages given.