Malaysia can produce 20 tons of fish or 5 tons of rice per month. Thailand can...

Malaysia can produce 20 tons of fish or 5 tons of rice per month. Thailand can produce 25 tons of fish or 20 tons of rice per month.

a) Assuming both countries are using the same amount of capital and labor, which country has the absolute advantage in producing fish? In producing rice?

b) What is the opportunity cost of producing one ton of fish for Malaysia? For Thailand? Show work.

c) What is the opportunity cost of producing one ton of rice for Malaysia? For Thailand? Show work.

d) Which country has the comparative advantage in producing fish? In producing rice?

Expert Solution

a) Thailand has absolute advantage in the production of both Fish and Rice. Because Thailand could produce more of both the goods.

b) For Malaysia - Opportunity cost of one ton of fish = total rice/ total fish = 5/20 = 0.25 ton of rice.

For Thailand - Opportunity cost of one ton of fish = total rice / total fish = 20/25 = 0.80 ton of rice.

c) For Malaysia - opportunity cost of one ton of Rice = total fish/rice = 20/5 = 4 ton of fish

For Thailand - opportunity cost of one ton of rice = total fish/ rice = 25/20 = 1.25 ton of fish

D) Comparative advantage is found out by seeing opportunity cost. Country which have less opportunity cost will have comparative advantage in that product.

Malaysia has less opportunity cost in fish so it have comparative advantage in fish.

Thailand has less opportunity cost in rice so it have comparative advantage in rice.

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Rahul Sunny answered 8 months ago

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