Question

In: Accounting

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 2 years ago
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