New SIDBI Grade A New Batch Starts on Nov 18

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    Question

    Country A can produce 10 units of cloth or 5 units of wine in a day. Country B can produce 6 units of cloth or 4 units of wine in a day. Which country has the absolute advantage in the production of cloth and wine?

    A Country A has the absolute advantage in both cloth and wine. Correct Answer Incorrect Answer
    B Country B has the absolute advantage in both cloth and wine Correct Answer Incorrect Answer
    C Country A has the absolute advantage in cloth, and Country B has the absolute advantage in wine. Correct Answer Incorrect Answer
    D Country B has the absolute advantage in cloth, and Country A has the absolute advantage in wine Correct Answer Incorrect Answer

    Solution

    • Country A:
      • Can produce 10 units of cloth in a day.
      • Can produce 5 units of wine in a day.
    • Country B:
      • Can produce 6 units of cloth in a day.
      • Can produce 4 units of wine in a day.
    Absolute Advantage The concept of absolute advantage refers to the ability of a country to produce more of a good with the same amount of resources compared to another country. To determine which country has the absolute advantage, we compare the maximum output of each good that each country can produce.
    1. Compare the production of cloth:
      • Country A: 10 units of cloth per day
      • Country B: 6 units of cloth per day
    Since Country A can produce more units of cloth per day than Country B, Country A has the absolute advantage in the production of cloth.
    1. Compare the production of wine:
      • Country A: 5 units of wine per day
      • Country B: 4 units of wine per day
    Since Country A can produce more units of wine per day than Country B, Country A also has the absolute advantage in the production of wine. Conclusion Based on the comparison of production capabilities:
    • Country A has the absolute advantage in the production of both cloth and wine.
     

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