Question

In the country Gamma it takes 6 hours to produce one automobile and 1 hour to produce a bale of cotton. In the country Delta it takes 10 hours to produce one automobile and 2.5 hours to produce a bale of cotton. Which of the following is true? (2 points)


The countries cannot benefit from specialization and trade.

Delta has an absolute advantage in producing cotton and a comparative advantage in producing automobiles.

Delta has an absolute advantage in producing both automobiles and cotton.

Gamma has an absolute advantage in producing both goods and a comparative advantage in producing cotton.

Gamma would benefit from trading between 6 automobiles for one bale of cotton.

Answer 1

In manufacturing combined products Gamma does have an overwhelming benefit and a comparative for the cotton production. A further explanation is below.

• Throughout this case, this same Country gamma takes much less time in manufacturing products that also are produced for 6 hours throughout one vehicle as well as one hour throughout one cotton bundle.
• Thus, Gamma does indeed have a competitive advantage compared to Delta, since the production of such a cotton ball takes 10 hours to complete a car as well as 2.5 hours.

Thus the above answer is right.

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