oblem 1 (Absolute and Comparative Advantage) (Chapter 2)You have the following information concerning the production of wheat and cloth in the United States and the United Kingdom: Labor Hours Required to Produce One Unit The United KingdomThe United StatesWheat21Cloth65What is the opportunity cost of producing a unit of wheat in the United Kingdom? In the United States?Which country has an absolute advantage in producing wheat? In producing cloth?Which country has a comparative advantage in producing wheat? In producing cloth?Which country should specialize in producing wheat? In producing cloth?

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ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter2: Economic Tools And Economic Systems

Section: Chapter Questions

Problem 2.3P

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oblem 1 (Absolute and Comparative Advantage) (Chapter 2)

You have the following information concerning the production of wheat and cloth in the United States and the United Kingdom:

	Labor Hours Required to Produce One Unit
	The United Kingdom	The United States
Wheat	2	1
Cloth	6	5

1. What is the opportunity cost of producing a unit of wheat in the United Kingdom? In the United States?
2. Which country has an absolute advantage in producing wheat? In producing cloth?
3. Which country has a comparative advantage in producing wheat? In producing cloth?
4. Which country should specialize in producing wheat? In producing cloth?

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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