Question

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true:__________
1. Georgeland has an absolute but not a comparative advantage in producing clothing.
2. Georgeland has both an absolute and a comparative advantage in producing clothing.
3. Alland has an absolute but not a comparative advantage in producing food.
4. Alland has both an absolute and a comparative advantage in producing food.

Answer 1

Answer:

3. Alland has an absolute but not a comparative advantage in producing food.

Explanation:

A country has a comparative advantage over another country when the opportunity cost of producing one good over another is lower.

A country has an absolute advantage over another country when it can produce a good by using fewer resources, or produce the same amount of goods but during a shorter period of time.

In this case, Alland has an absolute advantage since it can produce twice as much food than Georgeland, but its opportunity cost of producing food is the same as Georgeland's = 2 units of food per 1 unit of clothing. Since the opportunity costs for both countries are the same, there is no comparative advantage. Alland will also have an absolute advantage in producing clothing.