Question:

Comparative Advantage 1?

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Use the following to answer question 7:

Table: Comparative Advantage 1

Sweden and Finland produce only two goods, herring and cell phones, and this table shows the maximum amount that each nation can produce of the two good.

Sweden Finland

Herring 100,000 50,000

Cell Phones 10,000 10,000

(Table: Comparative Advantage 1) Sweden has an absolute advantage in producing:

A) Cell phones only.

B) Herring only.

C) Both cell phones and herring.

D) None of the above.

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  1. The correct answer is: B) Herring only.

    [ In cwell phones, in absolute terms Sweden has no greater advantage than Finland. as they would be able to produce 10,000 cell phones each maximum using the resource endowments they have. Sweden also has comparative advantage in Herring while Finland has comparative advantage in cell phobnes.]

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