ok so, i took a test in my economics class.. high school... and this is the question..
Mars:
food.....clothing
0.........30
2.........24
4.........18
5*........12*
8..........6
10........0
Venus:
food.....clothing
0.........40
4.........32
8*........24*
12........16
16........8
20........0
1. Which of the following statements is correct based on the concept of comparative advantage?
a. Mars and Venus should continue producing the quantities indicated by the asterisks(*).
b. mars should specialize in the production of food
c. mars should specialize in the production of clohing
d. venus has the comparative advantage in clothing
e. mars has an absolute advantage in the production of food
also could you explain the answer, my teacher gave us the test back with correct answers.. then suddenly as he went over the test, he found an error in his own "test key" he had "c." as the answer.. but changed it to "d." i just want to verify if that is truly the correct answer.... for any economist this must be a piece of cake question :P thank you
Answers & Comments
Verified answer
Alright so I'm gonna break this down for you :P
Mars, for every unit of food it produces, has an opportunity cost of 3 clothings. So i like to shorten it to be its production is 1:3 of food:clothing
Venus has a production of 1:2 of food:clothing.
When mars produces a unit of food, it could have produced 3 units of clothing, however in producing a unit of food venus only gives up 2 units of clothing. This means it has a COMPARATIVE advantage in producing clothing.
However, venus has an ABSOLUTE advantage in making everything, because it has a higher production of both products at all levels.
If venus specialized in clothing, and mars specialized in food, than together they would produce 10 units of food, and 40 units of clothing. At the asterisk 13 units of food, and 36 units of clothing are being produced. Meaning that specialization will not work, so B is not true.
C is not true because mars has a big disadvantage in producing clothing.
e mars has no absolute advantage in anything, because venus out produces mars in both goods.
A is a tougher one to answer, however because we know that there is a comparative advantage at play here than 50/50 production will not be optimum so it is wrong.
I think that covers it all, although in no particular order haha.
Let me know if you have any more Questions :)
Venus And Mars Clothing