Assume that Colombia had 1,600,000 workers and Mexico had 800,000 workers, respectively. This is the only...

Assume that Colombia had 1,600,000 workers and Mexico had 800,000 workers, respectively. This is the only factor input to produce beef and fish.

Units of labor required per unit of output:

Colombia Mexico

Beef 4 4

Fish 8 2

In this case, Colombia has a comparative advantage in beef. Is this true or false?

Solutions

Expert Solution

Columbia requires 4 workers to produce a unit of beef and 8 units to produce unit of fish so with 1600000 workers, it can produce 1600000/4 = 400000 beef or 200000 fish

OC to produce beef = 200000/400000 = 0.5

Mexico requires 4 units to produce beef and 2 units to produce fish so with 800000 workers, it can produce 800000/4 = 200000 beef or 800000/2 = 400000 fish

OC to produce Befef = 400000/200000 = 2

So, the statement is True as Columbia does have a comparative advantage in producing beef as of is lower.

Rahul Sunny answered 1 year ago

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