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AP® Macroeconomics

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Comparative Advantage: Cherries and Tea

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Two countries both produce cherries and tea. Country A has the absolute advantage in producing both cherries and tea and the comparative advantage in producing tea. Country B does not have the absolute advantage in either good, but it does have the comparative advantage in producing cherries.

Based on this information, which of the following statements is true?

A

Country A and Country B cannot make themselves any better off than they currently are.

B

Both countries would be better off if Country A specialized in tea and Country B specialized in cherries and they traded.

C

Both countries would be better off if Country A specialized in cherries and Country B specialized in tea and they traded.

D

Country A would be better off if the countries specialized and traded, but not Country B.

E

Country B would be better off if the countries specialized and traded, but not Country A.