Question

In which of the following cases should the United States produce more noodles than it wants for its own use and trade some of those noodles to Italy in exchange for wine?
A. Italy has a comparative advantage over the United States in producing wine.
B. The United States has an absolute advantage over Italy in producing noodles.
C. The opportunity cost of producing a gallon of wine is the same for Italy as it is for the United States.
D. Americans know less than Italians know about cooking noodles.

Answer 1

Answer:

A. Italy has a comparative advantage over the United States in producing wine.

Explanation:

A country has comparative advantage in production if it produces at a lower opportunity cost when compared with other countries. A country should specialise in the production of the good for whuch it has comparative advantage in and import goods for which it doesn't have comparative advantage in its production.

If Italy has comparative advantage in the production of wine and the US doesn't, Italy should produce wine and export to the US. While, US should produce pasta and export to Italy, if has a comparative advantage in the production of pasta.

A country has absolute advantage in the production of a good or service if it produces more quantity of the good when compared with other countries.

I hope my answer helps you