ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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### Comparative Advantage Scenario
**Scenario Description:**
If Texia specializes in food, it can produce 1,000 units of food and 0 units of clothing this year. If it specializes in clothing, it can produce 500 units of clothing and 0 units of food. This year, Urbania can produce either 500 units of food and 0 units of clothing or 200 units of clothing and 0 units of food. (Assume linear production possibility frontiers.)
**Question:**
_______ has the comparative advantage in the production of clothing and _______ has the comparative advantage in the production of food.
**Multiple Choice Options:**
- ○ Urbania; Texia
- ○ Texia; Texia
- ○ Urbania; Urbania
- ○ Texia; Urbania
**Explanation:**
To determine which country has the comparative advantage, we need to compare the opportunity costs of producing goods in each country. The country with the lower opportunity cost in producing a good has the comparative advantage in that good.
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Note: There are no graphs or diagrams accompanying this scenario.
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