Question

Suppose that it takes an average Australian miner 10 hours to mine a ton of coal and 20 hours to mine a ton of manganese. It takes the average South African miner 4 hours to mine a ton of coal and 12 hours to mine a ton of manganese.

a) For each miner, calculate the opportunity cost of mining a ton of coal and a ton of manganese.

b) In what task does each miner have a comparative advantage? Briefly explain.

c) Which resource will each country import? How about export?

Answer 1

(a)

An average Australian miner takes 10 hours to mine a ton of coal and 20 hours to mine a ton of manganese.

So,

The opportunity cost of mining a ton of coal for Australian miner is (10/20) 1/2 ton of maganese.

The opportunity cost of mining a ton of maganese for Australian miner is (20/10) 2 tons of coal.

An average South African miner takes 4 hours to mine a ton of coal and 12 hours to mine a ton of manganese.

So,

The opportunity cost of mining a ton of coal for South African miner is (4/12) 1/3 ton of maganese.

The opportunity cost of mining a ton of maganese for South African miner is (12/4) 3 tons of coal.

(b)

A person has comparative advantage in that task which it can undertake at lower opportunity cost relative to other person.

Australian miner can mine maganese at lower opportunity cost relative to South African miner.

Thus,

Australian miner has comparative advantage in mining maganese.

South African miner can mine coal at lower opportunity cost relative to Australian miner.

Thus,

South African miner has comparative advantage in mining coal.

(c)

A country impoprts that resource in which it has comparative disadvantage and exports that resource in which it has comparative advantage.

Thus,

Australia will import coal whereas South Africa will import maganese.

Australia will export maganese whereas South Africa will export coal.