Question

Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if
a. the U.S. has an absolute advantage over Canada in producing computer software.
b. the opportunity cost of producing a bushel of wheat is lower for Canada than it is for the U.S.
c. the opportunity cost of producing a bushel of wheat is lower for the U.S. than it is for Canada.
d. Canada requires fewer resources than the U.S. to produce a bushel of wheat.

Answer 1

Answer:

The correct answer is d. Canada requires fewer resources than the U.S. to produce a bushel of wheat.

Explanation:

A country (in this case Canada) has a comparative advantage over another country (in this case the United States) to produce a certain product (in this case wheat) if the production costs of that product (wheat) are less than from the other country, regardless of the opportunity cost of producing that other product in that country.

The comparative advantage is based on the fact that the country has developed greater efficiency in the use of resources or that it has greater ease of access to them due to better conditions of nature, greater technological development in the field in question, human capital more specialized in that economic field, etc.

The opportunity cost of producing a product or another in the same country does not affect a deterioration or increase of the comparative advantage developed to produce such a product.