Question

Assume Italy and Chad 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 Italy can produce 10 t of grain or 5 t of dates in a season. Each farmer in Chad can also produce 10 t of grain or 25 t of dates.
1. Which country has the absolute advantage in producing dates?
A. Italy.
B. Chad.
C. Neither.
2. Which country has the absolute advantage in producing grain?
A. Italy.
B. Chad.
C. Neither.
3. Which country has the competitive advantage in producing dates?
A. Italy.
B. Chad.
C. Neither.
4. Which country has the comparative advantage in producing grain?
A. Italy.
B. Chad.
C. Neither.

Answer 1

Answer:

chad

neither

chad

Italy

Explanation:

A country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries.

The opportunity cost of  Italy in producing one unit of grain = 5/10 = 0.5t dates

The opportunity cost of  Italy in producing one unit of dates = 10/5 = 2grains

The opportunity cost of  Chad in producing one unit of grain =  25/10 = 2.5 dates

The opportunity cost of  Chad in producing one unit of dates = 10/25 = 0.4 grains

Italy has a comparative advantage in the production of grains while Chad has a comparative advantage in the production of dates

A country has absolute advantage in the production of a good or service if it produces more quantity of a good when compared to other countries. Chad produces 25t of dates while Italy produces 5t of dates, this shows that Chad has an absolute advantage in the production of dates. Both Italy and Chad produces the same quantity of grains so neither have an absolute advantage in the production of grains.