Question

The United States is trading salmon to Peru in exchange for anchovies. If these nations are trading based upon relative per-unit opportunity costs, what must
be the case?
A The United States has comparative advantage in salmon production, and Peru has absolute advantage in anchovy production.
B The United States has comparative advantage in salmon production, and Peru has comparative advantage in anchovy production.
The United States has absolute advantage in anchovy production, and Peru has absolute advantage in salmon production.
The United States has comparative advantage in anchovy production, and Peru has comparative advantage in salmon production.
The United States has absolute advantage in salmon production, and Peru has absolute advantage in anchovy production.

Answer 1

Answer:

B The United States has comparative advantage in salmon production, and Peru has comparative advantage in anchovy production.

Explanation:

For the exchange to be based upon relative per-unit opportunity costs, there is need for one of the countries to be at a comparative advantage in one of the products.

This offer them the opportunity to be at the deciding factor on which countries they would like to trade with. From the scenario, it shows that United States and Peru both have comparative advantage with the different products which they are trading with each other.