Question

Suppose the United Kingdom and Norway both produce ol and fish oil, which are sold for the same prices in both countries. The following table shows combinations of both goods that each country can produce in a day, measured in thousands of barrels, using the same arnaunts of capital arnd labor United K Fish 12 ish 12 Who has the comparative advantage i preducing oil? A. Nelther country has a comperative advantage producing oll because their opportunity costs of producing ol are equal. O B. The United Kingdom has a comparative advantage producing oil becaust it can produce more ail C. Norway has a comparative advantage producing oil because it can produce more oi D The United Kingdum has a comparative advantage produing oil because ils opportunity cost of producing oil is lower Norway has a comparative advantage producing oil because its opportunity cost of producing oil is lower. O E. Can these two countries gain from trading oil and fish oil? O A. These countries can gain from trade because The United Kingdom has an absolute advantage producing oil O B. These countries can gain from trade because their opportunity costs of producing each good are the same. ⓔ C. These countries cannot gain rom trade because neither has a comparative advantage producing either good O D. These countries cannot gain from trada because neither has an absolute advantage producing either good. O E. These countries can gain from trade because Norway has an absclute advantage producing fish oil.

Answer 1

Answer 1

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Neither country has a comparative advantage producing oil because their opportunity costs of producing oil are equal.

Lets understand by ratios

In UK when the country is producing oil 3 barrels at the same time it is producing fish oil of 9 barrels .That means the ratio of producing oil: fish oil is 3:9 or 1:3 . At the same time in Norway when the country is producing 1 barrel of oil at the same time it is producing fish oil of 3 barrels . That means ratio is of 1:3 . Therefore the ratio of producing oil and fish oil is same in both the countries ( opportunity cost ) .So neither country has a comparative advantage .

Answer 2

These countries cannot gain from trade because neither has a comparative advantage producing either good.

In UK when the country is producing oil 3 barrels at the same time it is producing fish oil of 9 barrels .That means the ratio of producing oil: fish oil is 3:9 or 1:3 . At the same time in Norway when the country is producing 1 barrel of oil at the same time it is producing fish oil of 3 barrels . That means ratio is of 1:3 . Therefore the ratio of producing oil and fish oil is same in both the countries ( opportunity cost ) .So neither country has a comparative advantage .