The table below provides information on the production of products in two countries. use the law of comparative advantage to choose the statement that describes the products that each country will export to the other country.
(LRVs) Buses
Country A/ 500/ 1000
Country B/ 450/ 1350
To determine which products each country will export to the other country based on the law of comparative advantage, we need to compare their production ratios (LRVs to Buses).
Country A has a production ratio of 500/1000 = 0.5 LRVs per Bus.
Country B has a production ratio of 450/1350 = 0.333 LRVs per Bus.
According to the law of comparative advantage, a country will export the product in which it has a lower opportunity cost (or a lower production ratio).
In this case, Country B has a lower production ratio for LRVs (0.333) compared to Country A (0.5). Therefore, Country B has a comparative advantage in producing LRVs and will export LRVs to Country A.
Similarly, Country A has a lower production ratio for Buses (0.5) compared to Country B (0.333). Therefore, Country A has a comparative advantage in producing Buses and will export Buses to Country B.
Therefore, the statement that describes the products each country will export to the other country is:
Country A will export Buses to Country B, and Country B will export LRVs to Country A.