Question

Assume France and Mali can both produce grain and dates, and that the only limited resource is the farming labor force, meaning that land, water, and all other resources are plentiful in both countries. Each farmer in France can produce 10 metric tons of grain or 5 metric tons of dates in a season. Each farmer in Mali can also produce 10 metric tons of grain or 25 metric tons of dates.1) Which country has the absolute advantage in producing dates?A. MaliB. FranceC. Neither2) Which country has the absolute advantage in producing grain?A. MaliB. FranceC. Neither3) Which country has the competitive advantage in producing dates?A. MaliB. FranceC. Neither4) Which country has the comparative advantage in producing grain?A. MaliB. FranceC. Neither

Answer 1

Answer:

1. Option (A) is correct.

2. Option (C) is correct.

3. Option (A) is correct.

4. Option (B) is correct.

Explanation:

1. Mali has an absolute advantage in producing dates because it produces more number of dates than France with the same level of resources.  

25 metric ton > 5 metric ton

2. No country has an absolute advantage in producing grain because both the countries are producing same amount of grain with the same level of resources.

10 metric tons of grain each

3.  

Opportunity cost of producing a date in France = 10 ÷ 5

                                                                               = 2 tons of grain

Opportunity cost of dates in Mali = 10 ÷ 25

                                                       = 0.4 tons of grain

Therefore,

Mali has a comparative advantage in producing dates because it has the lower opportunity cost of producing dates than France.

4.  Opportunity cost of producing a ton of grain in France = 5 ÷ 10

                                                                                                = 0.5 dates

Opportunity cost of producing a ton of grain in Mali = 25 ÷ 10

                                                                                       = 2.5 dates

Therefore,

France has a comparative advantage in producing grain because it has the lower opportunity cost of producing grain than Mali.