Use the table below,which outlines the production possibilities of Qatar and Botswana in wine and wheat,to answer the following question.

The law of comparative advantage suggests that
A)neither country would gain from trade,even if the costs for transporting the products were zero.
B)Qatar would not gain from trade because it has an absolute advantage in producing both goods.
C)both countries would gain if Botswana traded wine made in Botswana for Qatar's wheat.
D)both countries would gain if Botswana traded wheat grown in Botswana for Qatar's wine.

Question

Use the table below,which outlines the production possibilities of Qatar and Botswana in wine and wheat,to answer the following question.

The law of comparative advantage suggests that
A)neither country would gain from trade,even if the costs for transporting the products were zero. 
B)Qatar would not gain from trade because it has an absolute advantage in producing both goods. 
C)both countries would gain if Botswana traded wine made in Botswana for Qatar's wheat. 
D)both countries would gain if Botswana traded wheat grown in Botswana for Qatar's wine.

Quizplus · Accepted Answer

The law of comparative advantage suggests that both countries should specialize in producing the goods that they can produce at a lower opportunity cost and then trade with each other. Looking at the table, we can see that Qatar has a lower opportunity cost of producing wheat (it only gives up 2 bottles of wine for 1 unit of wheat) and Botswana has a lower opportunity cost of producing wine (it only gives up 0.5 units of wheat for 1 bottle of wine). Therefore, if Botswana trades its wheat with Qatar for wine, both countries can benefit from the trade.

Use the Table Below,which Outlines the Production Possibilities of Qatar