Table 3-34
Assume that Indonesia and India can switch between producing rice and bananas at a constant rate.

-Refer to Table 3-34. For which good(s) does Indonesia have a comparative advantage
A)rice and bananas.
B)rice but not bananas.
C)bananas but not rice.
D)nether rice nor bananas.

Question

Table 3-34
Assume that Indonesia and India can switch between producing rice and bananas at a constant rate.
​ 
-Refer to Table 3-34. For which good(s) does Indonesia have a comparative advantage
A)rice and bananas. 
B)rice but not bananas. 
C)bananas but not rice. 
D)nether rice nor bananas.

Quizplus · Accepted Answer

Indonesia has a lower opportunity cost of producing rice compared to India as Indonesia's opportunity cost of producing 1 ton of rice is only 0.5 tons of bananas, while India's opportunity cost of producing 1 ton of rice is 1 ton of bananas. Therefore, Indonesia has a comparative advantage in producing rice. However, Indonesia has a higher opportunity cost of producing bananas compared to India as Indonesia's opportunity cost of producing 1 ton of bananas is 2 tons of rice, while India's opportunity cost of producing 1 ton of bananas is only 1.5 tons of rice. Therefore, India has a comparative advantage in producing bananas.

Table 3-34 Assume That Indonesia and India Can Switch Between Producing Rice