Country 1 has a comparative advantage in the production of , and country 2 has a comparative advantage in the production of .
a. good A; good B
b. good B; good A
c. both goods; neither good neither good;
d. both goods neither good; neither good

a. good A; good B

Explanation:

Hello.

Your question seems to be lacking a fundamental piece of the puzzle.

Lemme add that for you.

Right then.

We need to know the opportunity costs in Country A and B for the 2 goods.

Country A

In Country A, if we produce none of Good B we are able to make 250 units of good A

If we product none of group A though, we can make 50 units of group B.

The opportunity cost of making A is,

= Production of B/ Production of A

= 50/250

= 0.2 B

For every Good A we produce we forego 0.2 of B

And for every Good B we produce we forego 250/50 = 5 units of A

Country B

In Country B, if we produce none of Good B we are able to make 75 units of good A

If we product none of group A though, we can make 75 units of group B.

The opportunity cost of making A is,

= Production of B/ Production of A

= 75/75

= 1 B

For every Good A we produce we forego 1 of B

And for every Good B we produce we forego 75/75 = 1 unit of A

This shows that Country 1 has a comparative Advantage in producing Good A because the Opportunity Cost is less. While Country B has a comparative Advantage in producing Good B because the opportunity cost is less as well.

So option A is correct.

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