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5- (Table: Home and Foreign Prices for Manufacturing and Agriculture) Consider the information provided about the price of ag

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Answer #1

This problem can be solved by finding out opprtunity cost. The Opportunity lost in terms of producing other good

For Home Country

Opportunity cost of Agriculture =Pm/ Pa= 5/3= 1.67

For Foreign Country

Opportunity Cost of Agriculture = Pm*/Pa*​​​​​​​​​​​​​​ = 7/3= 2.33

Home has comparitive advantage in Agriculture since its opportunity cost is lower .

So answer is A

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