Country X can produce 10 units of rice or 5 units of cloth with one unit of labour, while Country Y can produce 4 units of rice or 4 units of cloth with one unit of labour. According to the principle of comparative advantage, which of the following is correct?

The opportunity cost of rice in Country X is 0.5 units of cloth (5/10), while in Country Y it is 1 unit of cloth (4/4). Since Country X has a lower opportunity cost for rice, it has a comparative advantage in rice. Country Y's opportunity cost for cloth is 1 unit of rice, while Country X's is 2 units of rice (10/5), so Country Y has a comparative advantage in cloth. Therefore, Country X should specialise in rice and Country Y in cloth.