2. If Nicaragua can produce with the same amount of resources twice as much coff

Question

2. If Nicaragua can produce with the same amount of resources twice as much coffee as Colombia, explain how Colombia could have a comparative advantage in producing coffee. 3. Bonus: Given the situation above, is it possible for Colombia to have an absolute advantage in the production of coffee? Why? 4. Evaluate the use of the word demand in the the following two news articles. Do you agree with how the word demand is used? Briefly explain. (e) An article int he Wall Street Journal noted that an "increase in the price of oil quickly reduces the demand for oil." (b) A different article in the Wall Street Journal noted, "Electric cars are poised to reduce U.S. gasoline

Explanation / Answer

2) Comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.Colombia can still have the comparative advantage in coffee if it is even less efficient in the production of goods other than coffee.

As Colombia is involved in the manufacturing of coffee mainly for a very long time,so it's workers have acquired specialized knowledge and skill set in producing coffee that the other countries.This expertise in producing coffee gives them a comparative advantage over producing other goods and they will still prefer to produce more coffee than producing other goods therefore,colombia can still have the comparative advantage on producing coffee.

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