Consider two countries: Nepal and Sri Lanka. Each country produces food and clothing. You are told that if Nepal uses all its resources to produce Clothing, it produces a total of 600 units of Clothing. If it uses all its resources to produce Food, it can produce a total 300 units of Food. For Nepal, the opportunity cost of producing one unit of clothing is 0.5 units of Food, and the opportunity cost of producing one unit of food is 2 units of Clothing. On the other hand, if Sri Lanka uses all its resources to produce Clothing, it produces a total of 150 units of Clothing. If it uses all its resources to produce Food, it can produce a total 150 units of Food. The opportunity cost of producing one unit of Food for Sri Lanka is 1 unit of Clothing. The opportunity cost of producing one unit of Clothing for Sri Lanka is 1 unit of Food. If you were asked to comment on each country's comparative advantage, what would you say? a) Sri Lanka has a comparative advantage in producing Food, while Nepal has a comparative advantage in producing Clothing b) Sri Lanka has a comparative advantage in producing Clothing, while Nepal has a comparative advantage in producing Food c) Sri Lanka has a comparative advantage in producing both Food and Clothing d) Nepal has a comparative advantage in producing both Food and Clothing
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Consider two countries: Nepal and Sri Lanka. Each country produces food and clothing. You are told that if Nepal uses all its resources to produce Clothing, it produces a total of 600 units of Clothing. If it uses all its resources to produce Food, it can produce a total 300 units of Food. For Nepal, the
On the other hand, if Sri Lanka uses all its resources to produce Clothing, it produces a total of 150 units of Clothing. If it uses all its resources to produce Food, it can produce a total 150 units of Food. The opportunity cost of producing one unit of Food for Sri Lanka is 1 unit of Clothing. The opportunity cost of producing one unit of Clothing for Sri Lanka is 1 unit of Food. |
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If you were asked to comment on each country's |
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a) Sri Lanka has a comparative advantage in producing Food, while Nepal has a comparative advantage in producing Clothing |
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b) Sri Lanka has a comparative advantage in producing Clothing, while Nepal has a comparative advantage in producing Food |
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c) Sri Lanka has a comparative advantage in producing both Food and Clothing |
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d) Nepal has a comparative advantage in producing both Food and Clothing
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