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A5 hrs. B 10 hrs. 7 hrs. 8 hrs. With the above production matrix, individuals A and B have a choice whether or not to partici

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Answer #1

Correct answer: (a)

Reason: When total hours are 120 with each country,

A can produce either 120/5 = 24 M or 120/7 = 17.14N

B can produce either 120/10 = 12 M or 120/8 = 15 N

This means, in order to follow comparative advantage, country will produce when

24M + 15N > 12 M + 17.14 N

This makes option (a) correct

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