Question
If Country A uses all of the resources at its disposal, it can produce a maximum of 500 watches or 200 televisions. Within the same time frame, if Country B uses all of its resources, it can produce a maximum of 200 watches or 100 televisions. Which of the following must be true?(1 point)
Responses
Country A has the absolute advantage and the comparative advantage in watch production.
Country A has the absolute advantage and the comparative advantage in watch production.
Country B has the absolute advantage and the comparative advantage in watch production.
Country B has the absolute advantage and the comparative advantage in watch production.
Country A has the absolute advantage in watch production, but Country B has the comparative advantage in watch production.
Country A has the absolute advantage in watch production, but Country B has the comparative advantage in watch production.
Country B has the absolute advantage in watch production, but Country A has the comparative advantage in watch production.
Responses
Country A has the absolute advantage and the comparative advantage in watch production.
Country A has the absolute advantage and the comparative advantage in watch production.
Country B has the absolute advantage and the comparative advantage in watch production.
Country B has the absolute advantage and the comparative advantage in watch production.
Country A has the absolute advantage in watch production, but Country B has the comparative advantage in watch production.
Country A has the absolute advantage in watch production, but Country B has the comparative advantage in watch production.
Country B has the absolute advantage in watch production, but Country A has the comparative advantage in watch production.
Answers
Answered by
GPT-4o mini
To determine which statements are true regarding the absolute and comparative advantages in watch production for Country A and Country B, we need to analyze their production possibilities.
**Absolute Advantage:**
- Country A can produce 500 watches or 200 televisions.
- Country B can produce 200 watches or 100 televisions.
Country A has the absolute advantage in both watches and televisions because it can produce more of each than Country B when utilizing all its resources.
**Comparative Advantage:**
To determine comparative advantage, we need to calculate the opportunity cost of producing watches for each country.
1. **Country A:**
- The opportunity cost of producing 1 watch is equal to the televisions that could have been produced instead:
- If Country A produces 500 watches, it forgoes producing 200 televisions.
- Opportunity cost of 1 watch = 200 televisions / 500 watches = 0.4 televisions per watch.
2. **Country B:**
- Similarly, the opportunity cost of producing 1 watch:
- If Country B produces 200 watches, it forgoes producing 100 televisions.
- Opportunity cost of 1 watch = 100 televisions / 200 watches = 0.5 televisions per watch.
Comparative advantage is held by the country with the lower opportunity cost. Since Country A has an opportunity cost of 0.4 televisions per watch and Country B has an opportunity cost of 0.5 televisions per watch:
- Country A has the comparative advantage in watch production (lower opportunity cost).
### Conclusion:
- Country A has the **absolute advantage** in watch production.
- Country A has the **comparative advantage** in watch production.
So the correct answer is:
**Country A has the absolute advantage and the comparative advantage in watch production.**
**Absolute Advantage:**
- Country A can produce 500 watches or 200 televisions.
- Country B can produce 200 watches or 100 televisions.
Country A has the absolute advantage in both watches and televisions because it can produce more of each than Country B when utilizing all its resources.
**Comparative Advantage:**
To determine comparative advantage, we need to calculate the opportunity cost of producing watches for each country.
1. **Country A:**
- The opportunity cost of producing 1 watch is equal to the televisions that could have been produced instead:
- If Country A produces 500 watches, it forgoes producing 200 televisions.
- Opportunity cost of 1 watch = 200 televisions / 500 watches = 0.4 televisions per watch.
2. **Country B:**
- Similarly, the opportunity cost of producing 1 watch:
- If Country B produces 200 watches, it forgoes producing 100 televisions.
- Opportunity cost of 1 watch = 100 televisions / 200 watches = 0.5 televisions per watch.
Comparative advantage is held by the country with the lower opportunity cost. Since Country A has an opportunity cost of 0.4 televisions per watch and Country B has an opportunity cost of 0.5 televisions per watch:
- Country A has the comparative advantage in watch production (lower opportunity cost).
### Conclusion:
- Country A has the **absolute advantage** in watch production.
- Country A has the **comparative advantage** in watch production.
So the correct answer is:
**Country A has the absolute advantage and the comparative advantage in watch production.**