Use the following information to answer the next two questions. Downey Company bought a delivery truck for $62,000 on January 1,
1 answer:
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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
=
=
= 0.2
The opportunity cost of producing a metric ton of dates for France is
=
=
= 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
=
=
= 5
The opportunity cost of producing a metric ton of grain for France is
=
=
= 0.5
France has a lower opportunity cost in producing grains so we can say that it has comparative advantage in producing grains.