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3 years ago

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Assume that France and Morocco 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 20 metric tons of grain or 10 metric tons of dates in a season. Each farmer in Morocco can produce 25 metric tons of grain or 75 metric tons of dates in a season. Which of the following is true? a. Morocco has comparative advantage in producing dates b. France has comparative advantage in producing grain c. Morocco has absolute advantage in grain and dates d. All of the above

1 answer:

SashulF [63]3 years ago

4 0

Answer:

The correct answer is option d.

Explanation:

Absolute advantage refers to the situation when a firm can produce more of a commodity at the same cost, or same level of commodity at a lower cost.

Morocco can produce 25 metric tons of grain and 75 metric tons of date.

While France can produce 20 metric tons of grain and 10 metric tons of date.

We see that Morocco can produce more of both the commodities so it has an absolute advantage in production of both grain and dates.

Comparative advantage refers to the situation when a country is able to produce a commodity at a lower opportunity cost.

The opportunity cost of producing a metric ton of dates for Morocco is

= $\frac{what\ is\ sacrificed}{what\ is\ gained}$

= $\frac{25}{75}$

= 0.2

The opportunity cost of producing a metric ton of dates for France is

= $\frac{what\ is\ sacrificed}{what\ is\ gained}$

= $\frac{20}{10}$

= 2

Morocco has a lower opportunity cost in producing dates so we can say that it has comparative advantage in producing dates.

The opportunity cost of producing a metric ton of grain for Morocco is

= $\frac{what\ is\ sacrificed}{what\ is\ gained}$

= $\frac{75}{25}$

= 5

The opportunity cost of producing a metric ton of grain for France is

= $\frac{what\ is\ sacrificed}{what\ is\ gained}$

= $\frac{10}{20}$

= 0.5

France has a lower opportunity cost in producing grains so we can say that it has comparative advantage in producing grains.

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