This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the output per unit of labor in Foreign and Home for each of two goods. Use this information to answer the question that follows. Home Foreign Chocolate 5 pounds 1 pounds Whiskey 4 gallons 3 gallons Which of the following statements is true? O A. Home has the absolute advantage in both chocolate and whiskey production and the comparative advantage in whiskey production. O B. Foreign has the absolute advantage in both chocolate and whiskey production and the comparative advantage in chocolate production. O C. Foreign has the absolute and comparative advantage in whiskey production. O D. Home has the absolute advantage in both chocolate and whiskey production and the comparative advantage in chocolate production.

This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the output per unit of labor in Foreign and Home for each of two goods. Use this information to answer the question that follows. Home Foreign Chocolate 5 pounds 1 pounds Whiskey 4 gallons 3 gallons Which of the following statements is true? O A. Home has the absolute advantage in both chocolate and whiskey production and the comparative advantage in whiskey production. O B. Foreign has the absolute advantage in both chocolate and whiskey production and the comparative advantage in chocolate production. O C. Foreign has the absolute and comparative advantage in whiskey production. O D. Home has the absolute advantage in both chocolate and whiskey production and the comparative advantage in chocolate production.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter28: International Trade

Section: Chapter Questions

Problem 8P

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