Suppose Country A can produce 10 smoothies or 20 sandwiches per day, and Country B can produce 8 smoothies or 16 sandwiches per day. Who has the comparative advantage in selling smoothies?

• A. Neither country has a comparative advantage
• B. Country B
• C. Country A
• D. Both countries have the same comparative advantage

Answer: (B)

Verified step by step guidance

1. Identify the opportunity cost of producing one unit of smoothies in each country. Opportunity cost is what you give up to produce one more unit of a good.
2. Calculate the opportunity cost of 1 smoothie in Country A by dividing the number of sandwiches forgone by the number of smoothies produced: \(\text{Opportunity Cost}_{A} = \frac{20 \text{ sandwiches}}{10 \text{ smoothies}}\).
3. Calculate the opportunity cost of 1 smoothie in Country B similarly: \(\text{Opportunity Cost}_{B} = \frac{16 \text{ sandwiches}}{8 \text{ smoothies}}\).
4. Compare the opportunity costs calculated for both countries. The country with the lower opportunity cost of producing smoothies has the comparative advantage in smoothies.
5. Conclude which country has the comparative advantage in smoothies based on the lower opportunity cost.