A 4-column table has 2 rows. The first column is labeled country with entries Country A, Country B. The second column is labeled Cost (units) with entries 1, 1. The third column is labeled Petroleum (units) with entries 16 (0.5 O C), 8 (1 O C). The fourth column is labeled Seafood (units) with entries 8 (2 O C), 8 (1 O C).

Question

A 4-column table has 2 rows. The first column is labeled country with entries Country A, Country B. The second column is labeled Cost (units) with entries 1, 1. The third column is labeled Petroleum (units) with entries 16 (0.5 O C), 8 (1 O C). The fourth column is labeled Seafood (units) with entries 8 (2 O C), 8 (1 O C).

How can the law of comparative advantage be applied to Country A and Country B?

Both countries should produce petroleum and seafood.
Both countries should produce petroleum.
Country A should produce seafood, and Country B should produce petroleum.
Country A should produce petroleum, and Country B should produce seafood

Answer 1

According to the law of comparative advantage, Country A should produce seafood and Country B should produce petroleum, as each country has a comparative advantage in producing one of the goods. This will lead to increased efficiency and overall output, benefiting both countries in terms of trade.