Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Basic Question 2 of 15
Units of output per work day:
B. The United States has a comparative advantage in clothing and Japan has a comparative advantage in food.
C. The United States has a comparative advantage in food and clothing.
Which of the following statements is correct?
A. The United States has a comparative advantage in food and Japan has a comparative advantage in clothing.
B. The United States has a comparative advantage in clothing and Japan has a comparative advantage in food.
C. The United States has a comparative advantage in food and clothing.
User Contributed Comments 6
| User | Comment |
|---|---|
| CFA19 | compare opportunity cost (ratio) rather than units of output. |
| aartis | US Food 4/16 = 1/4 = 0.25 US Clothing 12/16 = 3/4 = 0.75 Japan Food 3/9 =1/3 = 0.33 Japan Clothing 6/9 = 2/3= 0.67 |
| smillis | US: 1 Food, Costs 3 Clothing Japan: 1 Food, Costs 2 Clothing (cheaper) US: 1 Clothing, Costs .33 Food (cheaper) Japan: 1 Clothing, Costs .5 Food |
| Rotigga | If US can make 3 units of clothing for every 1 unit of food versus Japan who can make only 2 units of clothing for every 1 unit of food, then the US is certainly better at making clothing than Japan in terms of quantity produced. |
| vi2009 | US: Total production per day is 4 units of food + 12 units of clothing. (1:3) => 1unit of food = 3 units of clothing OR (1/3:1) 1/3 of food = 1 clothing Japan: Total production per day is 3 units of food + 6 units of clothing. (1:2) OR (1/2 : 1) |
| chesschh | US has comparative advantage of clothing i.e They give up 1 unit of food to produce 3 units of clothing while Japan has to give up 1 unit of food to produce only 2 units of clothing. Japan has comparative advantage of food i.e They give up 2 units of clothing to produce 1 unit of food while the US has to give up 3 units of clothing to produce 1 unit of food. |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
describe the benefits and costs of international trade
CFA® 2025 Level I Curriculum, Volume 1, Module 6.