Question

The table below for the United States and Australia shows maximum feasible production rates per acre of Wheat if no Canola is produced and maximum feasible production rates per acre canola of if no wheat are produced. Assume that the opportunity costs of producing these goods are constant in both countries.

Output per Acre with Trade

United States wheat 80 tons canola 48 tons Australia wheat 55 tons canola 70 tons

For the United​ States, the opportunity cost of 1 ton of wheat is __ tons of canola . ​(Enter your response rounded to two decimal​ places.) ▼ ___ Country  a comparative advantage in wheat ​, and ▼____ has a comparative advantage in canola .

Answer 1

Opportunity cost is the value of the next best alternative.

	Wheat (tons)	Canola (tons)
United States	80	48
Australia	55	70

Opportunity cost is the value of the next best alternative.

	Opportunity cost of wheat in terms of canola	Opportunity cost of canola in terms of wheat
United States	48/80=0.6	80/48=1.67
Australia	70/55=                              1.27	55/70=0.79

For United States, the opportunity cost of 1 ton of wheat is 0.60 ton of canola.

United States has comparative advantage in producing wheat as its opportunity cost of producing wheat is 0.60, whereas, Australia has a higher opportunity cost of 1.27.

Australia has comparative advantage in producing Canola as its opportunity cost is 0.79 ton of wheat, whereas, United States has a higher opportunity cost of 1.67.