Matt, the sole shareholder of Pastel Corporation (a C corporation), has the corporation pay him a salary of $600,000 in the curr
1 answer:
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Answer: Higher; Comparative advantage
Explanation:
A country or a firm has a comparative advantage in producing a commodity if the opportunity cost of producing that commodity in terms of other commodities is lower than the other country or firm.
Opportunity cost is the benefit that is foregone for an individual by choosing one alternative over other alternatives available to him.
If the opportunity cost is lower for an individual then this will benefit him whereas if the opportunity cost is higher then this will not benefit the individuals.
Therefore,
United states's Opportunity cost of producing a pair of shoes =
= 5 apples have to be foregone for producing a pair of shoes
Canada's Opportunity cost of producing a pair of shoes =
= 2 apples have to be foregone for producing a pair of shoes
Hence, Canada has a comparative advantage in producing pairs of shoes because Canada's opportunity cost of producing a pair of shoes is lower than United states opportunity cost.