Homework Answers
A requires 5 hours to produce M.
A requires 7 hours to produce N.
Opportunity cost of producing M by A = 5/7 = 0.714285714 of N.
This can be written as (M=5/7N or N=7/5M).
B requires 10 hours to produce M.
B requires 8 hours to produce N.
Opportunity cost of producing M by B = 10/8 = 1.25 of N.
This can be written as (M= 10/8N or N=8/10M).
Because A has a lower opportunity cost, it should produce M.
Hence the correct option is
b. Because (N=7/5M) > (N=8/10M) individual A has a comparative advantage in the production of good M and should produce good M.
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