Suppose South Korea can produce 100 computer chips with 12 hours of labor input

Question

Suppose South Korea can produce 100 computer chips with 12 hours of labor input and 50 bed linens with 6 hours of labor input. The US can produce 100 computer chips with 10 hours of labor input and 50 bed linens with 4 hours of labor input.

The opportunity cost of producing 100 computer chips for South Korea is:

The opportunity cost of producing 50 bed linens for South Korea is:

The opportunity cost of producing 100 computer chips for the US is:

Using comparative advantage, which country should export bed linens?

Explanation / Answer

a) As South Korea can produce 100 computer chips in 12 hours and they can also produce 100-bed linen in the same amount of time the opportunity cost of producing 100 computer chips is 100-bed linen.

b) The opportunity cost of producing 50-bed linen is 50 computer chips.

c) The US takes 10 hours to produce 100 computer chips in that time they can produce 125-bed linen so the opportunity cost of producing 100 computer chips is 125-bed linen.

d) As the Us can produce more bed linen in the given amount of time they should produce more bed linen and they will have a comparative advantage in the production of it.  

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