Comparative Advantage Quiz
Comparative Advantage Quiz

The following quiz can be used to test understanding of the comparative advantage concept:

With the cost of production of two goods in two different countries, it is possible to calculate how much the two countries could gain from trade.

Imagine that country A can produce a unit of product A for $2 and a unit of product B for $3. Country B can produce a unit of product A for $1 and a unit of product B for $2, which means that country B is more efficient in the production of both goods. Country A has $60 available for production. Country B has $36 available for production. If the two countries do not trade and use half of their resources on the production of each good, how many units of each good would they produce?

Country A can produce 15 units of product A and ______ [10] units of product B

Country B can produce _______ [18] units of product A and 9 units of product B

Now, if the two countries concentrate on the production of what they do best, they could produce:

Country A: ______ [20] units of product B

Country B: ______ [36] units of product A

The two countries can then trade goods so that both countries could end up with:

________[18] units of product A

_______ [10] units of product B

 

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