Question
Country X and Country Y produce only two goods - banana and fish. If Country X puts all its efforts into producing only one good,
Country X and Country Y produce only two goods - banana and fish. If Country X puts all its efforts into producing only one good, it can produce either 10 units of banana or 10 units of fish. If Country Y puts all its efforts into producing only one good, it can produce either 15 units of banana or 30 units of fish. Which of the following is the best implication for the countries?
A)The comparative advantage theory suggests that Country X should produce only fish and that Country Y only banana. The two countries should trade.
B)The comparative advantage theory suggests that Country Y should produce both banana and fish and export them to Country X.
C)The absolute advantage theory suggests that Country X should produce only fish and that Country Y only banana. The two countries should trade.
D)The mercantilism theory suggests that Country Y should produce both banana and fish and export them to Country X.
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