Use the table to answer the question.

Question

Apples Bananas
Country A 500 1500
Country B 800 1600
The table above displays the amount Country A and Country B could produce if they focused all their resources and attention on producing either apples or bananas. They wish to enter into a trade agreement, and they are discussing on which country should focus on producing which fruit. Using the table above, which country should produce bananas and why? Remember to take absolute and comparative advantage into account when making this decision.

(1 point)
Responses

Country A since it has the comparative advantage in banana production.
Country A since it has the comparative advantage in banana production.

Country B since it has the comparative advantage in banana production.
Country B since it has the comparative advantage in banana production.

Country B since it has the absolute advantage in banana production.
Country B since it has the absolute advantage in banana production.

Country A since it has the absolute advantage in banana production.

Answer 1

To determine which country should produce bananas, we need to analyze both absolute and comparative advantages based on the production capabilities of each country.

1. Absolute Advantage: This is determined by looking at which country can produce more of a good using the same resources.

   • Country A can produce 1500 bananas.
   • Country B can produce 1600 bananas.
   • Conclusion: Country B has the absolute advantage in banana production because it can produce more bananas (1600 vs. 1500).

2. Comparative Advantage: This is determined by looking at opportunity costs. We need to find out how many apples each country sacrifices to produce one additional banana.

   • For Country A:

     • If it produces 1500 bananas, it does not produce any apples (0 apples).
     • If it produces 0 bananas, it produces 500 apples.
     • Therefore, the opportunity cost of producing 1 banana in Country A is 500 apples / 1500 bananas = 1/3 apples per banana.

   • For Country B:

     • If it produces 1600 bananas, it does not produce any apples (0 apples).
     • If it produces 0 bananas, it produces 800 apples.
     • Therefore, the opportunity cost of producing 1 banana in Country B is 800 apples / 1600 bananas = 1/2 apples per banana.

   • Conclusion: Country A has a lower opportunity cost for bananas (1/3 apples per banana) compared to Country B (1/2 apples per banana). Therefore, Country A has the comparative advantage in banana production.

Based on this analysis, the correct response is:

Country A since it has the comparative advantage in banana production.