Economics 9708 · AS & A Level · International trade and free trade

International trade and free trade — practice question

The table presents the output of rice and cotton for countries X and Y. Each country allocates its resources equally to producing rice and cotton. According to the law of comparative advantage, which statement is correct?

  • ACountry X has the higher opportunity cost in producing cotton.
  • BCountry Y has the lower opportunity cost in producing rice.
  • CCountry X should produce both goods as the opportunity cost is the same.
  • DCountry Y should produce both goods as it has an absolute advantage in both.

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