<p><span style=\"font-size: small;\">In one minute, Country B can produce either
ID: 1253129 • Letter: #
Question
<p><span>In one minute, Country B can produce either 1,000 TVs and no computers or 500 computers and no TVs. Similarly, in one minute Country C can produce either 2,400 TVs or 600 computers.</span><span> </span></p><p> </p>
<p><span>Compute the opportunity costs of TVs and computers for each country. </span><span> Which country has a comparative advantage in producing TVs? Which country has a comparative advantage in producing computers?</span></p>
Explanation / Answer
--------------------TVs------------------Computers B------------------1000-----------------------500 C------------------2400-----------------------600 C has the nominal advantage in both, obviously. But the comparative advantage is what matters, so we look at OCs: ------------------TVs-------------------------Computers B-------------0.5 computers/tv---------2 tvs/computer C------------0.25 computers/tv--------4 tvs/computer Therefore, it costs C less to produce a tv and it costs B less to produce a computer. So, it can be said that C has the comparative advantage in tvs, and B has the comparative advantage in computers.
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