Assume the following information regarding the production potential of one unit of resources: Argentina Taiwan...

Assume the following information regarding the production potential of one unit of resources:

Argentina
Taiwan

Beef
15 tons
6 tons

Chips
1,800 units
1,500 units

In trade between Argentina and Taiwan, Taiwan has

		An absolute advantage in producing beef
		An absolute advantage in producing chips
		A comparative advantage in producing beef
		A comparative advantage in producing chips

Solutions

Expert Solution

In trade between Argentina and Taiwan, Taiwan has
An absolute advantage in producing beef
An absolute advantage in producing chips
A comparative advantage in producing beef	Correct
A comparative advantage in producing chips

an absolute advantage over another in the production of a good if it can produce the same good with fewer resources than the other country. A city has a comparative advantage in the production of a good over another country it has a lower opportunity cost in its production relative to the other country

Country Taiwan

Opportunity Cost of 1 Beef A is 120 chips (1800/15)	120
Opportunity Cost of 1 chips B is 0.0083 Beef	0.00833

Country Argentina

Opportunity Cost of 1 Beef A is 250 chip	250
Opportunity Cost of 1 Chip B is .004 Beef	0.004


The opportunity cost for Taiwan for producinng Beef is lesser than the Argentina producing Beef,Therefore, Taiwan enjoys a comparative advantage for beef over the Argentina

ekkarill92 answered 1 year ago

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