Question

In Country A, the production of 1 bicycle requires using resources that could otherwise be used to produce 11 lamps. In Country B, the production of 1 bicycle requires using resources that could otherwise be used to produce 15 lamps. Which country has a comparative advantage in making bicycles?

1. Country A

2. Country B

Short answer

The correct option is a) Country A

Step-by-step solution

Step 1. Concept of comparative advantage 

The comparative advantage talks about the opportunity cost. The country has a comparative advantage when it has a lower opportunity cost for producing one good than the competing country. This can be explained using the next step.

Step 2. Explanation for the correct option (a) 

The opportunity cost of making bicycles for country A and country B are calculated below:

$$\begin{gathered} CountryA=\frac{Lamps}{Bicycles} \\ =\frac{11}{1} \\ =11Lamps \\ CountryB=\frac{Lamps}{Bicycles} \\ =\frac{15}{1} \\ =15Lamps \end{gathered}$$

The opportunity cost of producing bicycles is less in country A. Hence, country A has a comparative advantage in producing bicycles.