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WAEC Economics 2006 Question 45

Question 45

International Trade

Use the table below to answer the question.
Products | Ghana | Sierra Leone
Coffee | 8 tonnes | 2 tonnes
Cocoa | 7 tonnes | 5 tonnes
If specialization should take place, then

  1. A.Ghana should produce coffee and cocoa
  2. B.Ghana would benefit by producing cocoa only
  3. C.Sierra Leone should not produce any of the products
  4. D.Sierra Leone should produce cocoa and Ghana coffee.
Show the answer and explanation

Answer: D (Sierra Leone should produce cocoa and Ghana coffee.)

Explanation

Ghana is 4 times better at coffee but only 1.4 times better at cocoa, so Ghana has a comparative advantage in coffee and Sierra Leone in cocoa.