The U.S. can produce pizza for $7.50 each and barrels of beer for $37.
The U.S. can produce pizza for $7.50 each and barrels of beer for $37.50 each, and Germany can produce pizza for ¬5 each and barrels of beer for ¬15 each (¬ is the symbol for the euro, the currency Germany uses). If the exchange rate is 1.
50 $/¬ then A) the U.S. has a comparative advantage in the production of beer.
B) neither country has a comparative advantage in the production of beer.
C) the U.S. has a comparative advantage in the production of pizza.
D) the U.S. has a comparative advantage in the production of beer and pizza.
ANSWER
C
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