Given the information in the table above, if the Home economy suffered a meltdown, and the Unit Labor Requirements doubled to 20 for cloth and 40 for widgets then home should
A) export cloth.
B) export widgets.
C) export both and import nothing.
D) export and import nothing.
E) export widgets and import cloth.

Question

Quizplus · Accepted Answer

With the new unit labor requirements (20 for cloth and 40 for widgets), the home economy still has a comparative advantage in producing cloth because it requires fewer labor hours per unit compared to widgets. Therefore, it should export cloth. Comparative advantage is determined by which good has a lower opportunity cost to produce, not necessarily by which good is produced most efficiently in absolute terms.

Given the Information in the Table Above, If the Home