Sarah MoserI9/8/18 12:04 AM ECO 201 Hubbard &O\'Brien 60-5521 55344 Homework: AP

Question

Sarah MoserI9/8/18 12:04 AM ECO 201 Hubbard &O'Brien 60-5521 55344 Homework: APPLY Comparative Advantage Digital Interactive Score: 0.75 of 1 pt 6 of 10 (10 complete) Hw score: 88.64%, 9.75 or 11 pts CompAdv. Ex06 Assigned Media Question Help * 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 arè presented in the table below United States Mexico Hamburgers (in tons) Tacos (in tons) Hamburgers (in tons) 50 100 150 90 60 30 10 20 30 50 25 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 100 tons of hamburgers and 30 tons of tacos and Mexico is currently producing 20 tons of hamburgers and 25 tons of tacos. I the United States and Mexico each specialize in producing only one good (the good for which each has a comparative advantage) then a total ofaddional ton/s) of hamburgers can be produced for the two countries combined (enter a numeric using an integer) nter your answer in the answer box and then click Check Answer. Clear All doExercise(7) OK

Explanation / Answer

The United States has an absolute advantage in producing tacos because United states is producing more tacos.

In United states : Opportunity cost for producing hamburgers= 90/150=0.6 tons of tacos

And opportunity cost for producing tacos= 150/90= 1.67 tons of hamburgers.

In Mexico : Opportunity cost for producing hamburgers = 75/30= 2.5 tons of tacos.

And opportunity cost for producing tacos = 30/75= 0.4 tons of hamburgers.

Mexico has the comparative advantage in producing tacos because it has the lower opportunity cost for producing tacos.

Suppose U.S is currently producing 100 tons of hamburgers and 30 tons of tacos and Mexico is currently producing 20 tons of hamburgers and 25 tons of tacos.Total hamburgers produced by two countries= (100+20)= 120 tons . And total tacos produced by two countries= (30+25)=55 tons . If U.S and Mexico each specialize in producing only one good (i.e in which they have the comparative advantage ) . Then , Only U.S will produce hamburgers and Mexico will produce tacos .

Then, a total of 150 tons of hamburgers are produced and 75 tons of tacos are produced.

Hence, a total of (150-120) = 30 additional tons of hamburgers can be produced for the two countries combined.

Hamburgers (in tons) Tacos (in tons) U.S 150 90 Mexico 30 75

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