Asked by Tiffani Duncan on May 21, 2024
Verified
Italy has a comparative advantage in the production of
A) beer.
B) pizza.
C) both beer and pizza.
D) neither beer nor pizza.
Comparative Advantage
The capacity of a nation or company to manufacture a specific good or service with a lower opportunity cost compared to its rivals.
Absolute Advantage
The ability of an individual, company, or country to produce a good or service more efficiently than competitors with the same resources.
Production
Any good or service for which people are willing to pay.
- Make distinctions between absolute and comparative advantages in the sphere of international trading activities.
- Explain the concept of opportunity cost in the production and trade of goods.
Verified Answer
GB
Gabriel BinetMay 23, 2024
Final Answer :
A
Explanation :
Italy has a comparative advantage in beer because it produces more kegs per worker (8) compared to the American worker (5), indicating a lower opportunity cost in beer production. Comparative advantage is determined by who has the lower opportunity cost, not necessarily who produces more overall.
Learning Objectives
- Make distinctions between absolute and comparative advantages in the sphere of international trading activities.
- Explain the concept of opportunity cost in the production and trade of goods.