No Bull Economics Lessons

Macroeconomics & Microeconomics Concepts You Must Know

Basic Economic Concepts (9 of 10)

Question 9:
Assume that China can produce one computer using 20 resource units or one bicycle using 10 resource units, while India can produce one computer using 10 resource units and one bicycle using 30 resource units. If China and India agree to specialize and trade, which country will export bicycles?

A.  India
B.  China
C.  Neither
D.  Both

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Correct Answer: B, China. China's opportunity cost of producing one bicycle is 1/2 (10/20) a computer, which is less than India's opportunity cost of 3 (30/10) computers. China has the comparative advantage in bicycle production and will therefore specialize and export bikes.