Question

Suppose that the opportunity-cost ratio for pears and apples is 4P:1A in British Columbia but 1P:2A in Ontario. Which province has the comparative advantage in producing apples?

a) British Columbia

b) Ontario

c) Neither

Answer 1

Comparative advantage comes from the advantage from lower opportunity cost of production. Here the OC of 1 pear is 1/4 apples in British Columbia and 2 apples in Ontario. Since the opportunity cost of 1 pear is lower in British Columbia, it is British Columbia that has comparative advantage in producing pears.

Here the OC of 1 apple is 4 apples in British Columbia and 1/2 apples in Ontario. Now the opportunity cost of 1 apple is lower in Ontario, it is Ontario that has comparative advantage in producing apples.

Select b) Ontario