Which country has an absolute advantage in producing tacos? (1) . Which country

Question

Which country has an absolute advantage in producing

tacos?

(1)

.

Which country has a comparative advantage in producing

tacos?

(2)

.

Suppose the United States is currently producing 40

tons of hamburgers and 12

tons of tacos and Mexico is currently

producing 4

tons of hamburgers and 10

tons of tacos. If the United 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)

and a total of

additional

ton(s)

of tacos can be produced.

Explanation / Answer

1) US has an absolute advantage in tacos because they can maximally produce 12 tons while Mexico can only produce 10 tons.

2) Mexico has a comparative advantage in producing tacos because it is relatively at producing them.( US is 10 times better in producing hamburger and only 1.2 times better in producing tacos, therefore it is better for U.S to produce hamburger and let Mexico produce tacos.)

OR

You can calculate opportunity cost, for the US the opportunity cost of producing one ton of tacos is 0.83(10/12=0.83). For Mexico, it cost them 0.1 ton of hamburger for every ton of tacos produced (4/40=0.1). Assessing this information, Mexico has comparative advantage in production of tacos because their opportunity cost is less than that of the U.S.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

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