Respuesta :
Amount of wheat and cloth that each nation can produce in one day is provided, then
a) Wheat production in units of cloths :
In Britain : 1 wheat = 1.75 cloth
In U.S : 1 wheat = 0.60 cloth
b) United States has the comparative advantage in producing wheat.
c) Cloth production in units of wheats :
In Britain : 1 cloth = 0.57 wheat
In U.S : 1 cloth = 1.66 wheat
d) Great Britain has the comparative advantage in producing cloth.
Assume that great britain and the united states can both produce wheat (w) and cloth (c).
One day production table for each country :
wheat. Cloth
Britan 40 70
United States 150 90
a) Britain:
40 wheat = 70 cloth
So, 1 wheat = 70/40 = 1.75cloth
So, opportunity cost to produce 1 unit wheat is
1.75 unit cloths.
United States :
150 wheat = 90 cloths
So, 1 wheat = 90/150 = 0.60 cloth
So, opportunity cost to produce 1 unit wheat is
0.60 unit cloths.
b) U.S has comparative advantage in producing
wheat since it has lower opportunity cost.
c) Britain:
1 cloth = 40/70 = 0.57 wheat
US:
1 cloth = 150/90 = 1.66 wheat
d) Britain has comparative advantage in producing cloth since it has opportunity cost lower.
To learn more about comparative advantage , refer:
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