The Kingdom of Mocha enjoys no absolute advantage in crude oil, diamonds, or wool.However, the Mochans manufacture high-quality bows and arrows.Which statement about the Mochans is true?
A) The Mochans should try to produce their own crude oil, diamonds, and wool.
B) The Mochans have a comparative advantage in the production of bows and arrows.
C) The Mochans have an unqualified advantage in the production of bows and arrows.
D) The Mochans have a determined advantage in the production of arrows.
E) The Mochans are engaged in dumping bows and arrows.

Question

Quizplus · Accepted Answer

The concept of comparative advantage states that a country should specialize in producing and exporting goods that they can produce at a lower opportunity cost than other countries. In this case, although the Mochans do not have an absolute advantage in crude oil, diamonds, or wool, they have a comparative advantage in manufacturing high-quality bows and arrows. This means that they can produce bows and arrows at a lower opportunity cost compared to producing crude oil, diamonds, or wool, and therefore should specialize in this area. Option A is incorrect because it goes against the concept of comparative advantage. Option C and D are incorrect because an unqualified or determined advantage is not a valid economic term. Option E is incorrect as there is no evidence to suggest that the Mochans are engaging in dumping.

The Kingdom of Mocha Enjoys No Absolute Advantage in Crude