Assume that our world consists of only two countries: the United States and the Rest of the World (ROW). Both of these countries produce airplanes and computers. The amounts of each good produced during an hour in each country are provided in the table below. USROWAirplanes54Computers1510 What is the opportunity cost of 1 computer in the US? ____ __________ In the ROW? ______ ____________Who has the comparative advantage in airplanes? ________ Why?In computers? ______ Why?

US opportunity cost of producing 1 computer and in US can be calculated as follows: Thus, the…

Answered: Assume that our world consists of only…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter33: International Trade

Section: Chapter Questions

Problem 19CTQ: Look at Exercise 33.2. Compute the opportunity costs of producing sweaters and wine in both France...

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Assume that our world consists of only two countries: the United States and the Rest of the World (ROW). Both of these countries produce airplanes and computers. The amounts of each good produced during an hour in each country are provided in the table below.

	US	ROW
Airplanes	5	4
Computers	15	10

What is the opportunity cost of 1 computer in the US? ____ __________

In the ROW? ______ ____________

Who has the comparative advantage in airplanes? ________ Why?

In computers? ______ Why?

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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