Suppose the United States and Mexico both produce hamburgers and tacos. The comb

Question

Suppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below. United States Mexico Hamburgers ( Tacos (in tons) 27 18 Hamburgers (in tons) 0 Tacos (in tons 15 10 n tons) 10 20 30 Which country has an absolute advantage in producing tacos? The United States Which country has a comparative advantage in producing tacos? Mexico Suppose the United States is currently producing 20 tons of hamburgers and 9 tons of tacos and Mexico is currently producing 2 tons of hambrgers and 5 tons of tacos. If the Uited States and Mexico each specialize in producing only one good (the good for which each has a comparative advantage), then a total of additional ton/s) of hamburgers can be produced for the two countries combined (enter a numeric response using an integer)

Explanation / Answer

Absolute advanatge implies more production of a good than other country. On the basis of above table, we can see that United States has absolute advantage in the production of tacos.

Comparitive advanatge takes into account opportunity cost into account.

The opportunity cost of producing one taco in US is 10/28 =. 357 hamburgers

in mexico, the opportunity cost of producing 1 taco is 1/10=.1 hamburger

Thus, mexico has a lower opportunity cost of producing a taco. Thus, mexico has a comparitive advantage in the production of tacos.

If mexico specialises in production of tacos and US specialises in production of hamburgers, then a total of 30 tons hamburgers and 15 tons tacos will be produces.

Additional hamburgers =8 tons of hamburgers (30-20-2)

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.