Question 72

Country A has a comparative advantage in X.

Country A has a comparative advantage in producing good X because it can produce it at a lower opportunity cost compared to Country B. This is evident from the production data, which shows that Country A's resources are better utilized in the production of good X.

A) A has comp. adv. in X

This option is correct as Country A produces 20X while only producing 20Y, indicating it sacrifices less of good Y to produce good X compared to Country B. The opportunity cost of producing X in Country A is lower, affirming its comparative advantage.

B) A has comp. adv. in Y

This option is incorrect because Country A produces equal quantities of both goods, which does not indicate a comparative advantage in Y. The opportunity cost of producing Y in Country A is higher since it could produce more X at a lower cost.

C) B has abs. adv. in X

This option is incorrect as absolute advantage refers to the ability to produce more of a good with the same resources. Country B produces 6X, which is significantly lower than Country A's output of 20X, thus it does not hold an absolute advantage in X.

D) B has comp. adv. in both

This option is incorrect because for Country B to have a comparative advantage in both goods, it would need to produce them at a lower opportunity cost than Country A. However, the data shows that Country A has a comparative advantage in X, thus negating the possibility of B having an advantage in both.

Conclusion

The correct answer, A, is validated by the analysis of opportunity costs, demonstrating that Country A can produce good X more efficiently than Country B. All other options either misinterpret the concepts of comparative or absolute advantage or incorrectly apply the given production data. Thus, A is the definitive answer based on the provided information.