Question

Nebraska Virginia

Wheat 10 4

Cotton 12 6

21) Refer to the table above for the next few questions. Nebraska and Virginia each have 100 acres of farmland. The table gives the hypothetical figures for yield per acre in the two states. Who has the absolute advantage in the production of wheat?

a)Nebraska b)Virginia c) Both of the above d) None of the above

22) Who has the absolute advantage in the production of cotton?

a)Nebraska b)Virginia c)Both of the above d) None of the above

23) Who has the comparative advantage?

a) Nebraska b) Virginia c) Both of the above d) None of the above

24) Who has the comparative advantage in the production of cotton?

a)Nebraska b) Virginia c)Both of the above d) None of the above

Answer 1

21) Here Nebraska has the absolute advantage in the production of wheat as the yield per acre is 10 for Nebraska and 4 for Virginia. The answer is option (a).

22) Here Nebraska has the absolute advantage in the production of cotton as the yield per acre is 12 for Nebraska and 6 for Virginia.

If 100 acres are cultivated, Nebraska can cultivate 1000 bushels of wheat or 1200 bushels of cotton. Virginia can cultivate 400 bushels of wheat or 600 bushels of cotton. The opportunity cost of both countries are given below

Country	Opportunity cost of producing wheat	Opportunity cost of producing cotton
Nebraska	1.2 bushels of cotton (1200/1000)	0.83 bushels of wheat (1000/1200)
Virginia	1.5 bushels of cotton (600/400)	0.67 bushels of wheat (400/600)

23) Here Nebraska has comparative advantage in the production of wheat due to lower opportunity cost. The answer is option (a)

24) Here Virginia has comparative advantage in the production of cotton due to lower opportunity cost. The answer is option (b)