Homework Answers
[As HOMEWORKLIB’s policy and guideline, the first-four questions are answered below:]
Country A:
If there is no production of computer, 800 bushels of corn should be produced.
If there is no production of corn, 200 quantity of computer should be produced.
Country B:
If there is no production of computer, 400 bushels of corn should be produced.
If there is no production of corn, 500 quantity of computer should be produced.
a.
Opportunity cost is the best benefit foregone since an alternative course of action is chosen.
Based on the above detail, the following table of opportunity cost (OC) is prepared.
|
Corn |
Computer |
|||
|
units |
OC |
units |
OC |
|
|
A |
800 |
200/800 = 0.25 |
200 |
800/200 = 4 |
|
B |
400 |
500/400 = 1.25 |
500 |
400/500 = 0.80 |
Answer:
Opportunity cost of corn of A = 0.25
Opportunity cost of corn of B = 1.25
b.
Answer: country B
This is the best way of producing computer or the maximum number of computers. In the above table, it is the number 500 higher than 200. Therefore, B has the absolute advantage in computer.
c.
Answer: country A
Comparative advantage of a country must have lower opportunity cost. In case of corn production, A has lower opportunity cost of 0.25 compare to 1.25 of B. Therefore, A has comparative advantage of producing corn.
d.
Answer: Corn
One country’s export is other country’s import. One country specializes, if its opportunity cost is lower than other. The specialized country should produce the good and export.
Country A: It specializes in corn. It exports to B.
Country B: It specializes in computer since 0.80 is lower than 4. It exports to A.
B will import corn.
Add Answer to:
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