To answer this question, we need to determine the comparative advantage for each country. Comparative advantage refers to the ability of a country to produce a particular good at a lower opportunity cost compared to another country.
Here's a step-by-step breakdown:
1. Identify Production Capabilities:
- Country A can produce 40,000 carrots or 10,000 apples.
- Country B can produce 20,000 carrots or 10,000 apples.
2. Calculate Opportunity Cost:
- Opportunity Cost for Country A:
- 1 carrot: [tex]\( \frac{10,000 \text{ apples}}{40,000 \text{ carrots}} = 0.25 \text{ apples} \)[/tex]
- 1 apple: [tex]\( \frac{40,000 \text{ carrots}}{10,000 \text{ apples}} = 4 \text{ carrots} \)[/tex]
- Opportunity Cost for Country B:
- 1 carrot: [tex]\( \frac{10,000 \text{ apples}}{20,000 \text{ carrots}} = 0.5 \text{ apples} \)[/tex]
- 1 apple: [tex]\( \frac{20,000 \text{ carrots}}{10,000 \text{ apples}} = 2 \text{ carrots} \)[/tex]
3. Determine Comparative Advantage:
- Comparative Advantage in Carrots:
- Country A's opportunity cost: 0.25 apples per carrot.
- Country B's opportunity cost: 0.5 apples per carrot.
- Country A has a lower opportunity cost in producing carrots.
- Comparative Advantage in Apples:
- Country A's opportunity cost: 4 carrots per apple.
- Country B's opportunity cost: 2 carrots per apple.
- Country B has a lower opportunity cost in producing apples.
Based on the comparative advantage, the most effective way to maximize production efficiency through trade would be:
- Country A focuses on growing carrots, where it has the comparative advantage.
- Country B focuses on growing apples, where it has the comparative advantage.
Given these observations, the best outcome would be:
C. Country A would focus on growing carrots to trade with country B.
