Answered: Ecuador’s biggest export is crude…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Ecuador’s biggest export is crude petroleum (unprocessed), 63% of which it exports to the United States, and Ecuador’s biggest import is refined petroleum (processed), of which it imports 70% from the United States. Based on this information, which of the following statements is true?

Group of answer choices

Ecuador has comparative advantage in extracting crude petroleum; the US has comparative advantage in producing refined petroleum.

Not enough information.

The US has comparative advantage in extracting crude petroleum; Ecuador has comparative advantage in producing refined petroleum.

Ecuador has absolute advantage in extracting crude petroleum and the US has absolute advantage in producing refined petroleum.

Definition Video Definition Ability of a country to produce more output with a given level of input or to produce the same level of output with a lower level of input as compared to the other countries. For example, if Country A produces 200 units with the help of 10 units of labor, and Country B produces 300 units with 10 units of labor, Country A has an absolute advantage in the production of the good. Video

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