Assume the following information for the United States and Mexico. The United States can produce a...

Assume the following information for the United States and Mexico. The United States can produce a maximum of 600 bushels of barley or a maximum of 600 bushels of corn. Mexico can produce a maximum of 200 bushels of barley or 400 bushels of corn. Which country has a comparative advantage in the production of barley? Which country has a comparative advantage in the production of Corn? Show your work for the calculation of opportunity cost. (4 Points)

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Expert Solution

Ans. 1)

The United States

The opportunity cost of Barley

600 bushels of barley = 600 bushels of corn

1 bushel of barley = 1 bushel of corn

The opportunity cost of Corn

600 bushels of corn = 600 bushels of barley

1 bushel of corn = 1 bushel of barley

Mexico

The opportunity cost of Barley

200 bushels of barley = 400 bushels of corn

1 bushel of barley = 2 bushels of corn

The opportunity cost of Corn

400 bushels of corn = 200 bushels of barley

1 bushel of corn = 0.5 bushels of barley

Since the United States has the lower opportunity cost in the production of barley ( i.e. 1 bushel of barley = 1 bushel of corn )than Mexico ( i.e. 1 bushel of barley = 2 bushels of corn ). Therefore, the United States has a comparative advantage in the production of barley.

Similarly,

Since Mexico has the lower opportunity cost in the production of corn ( i.e. 1 bushel of corn = 0.5 bushels of barley) than the United States ( i.e. 1 bushel of corn = 1 bushel of barley ). Therefore, Mexico has a comparative advantage in the production of corn.

Rahul Sunny answered 1 month ago

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