Question

Consider the following table on labor hours needed to produce one unit of output for two different goods in two different countries:

	United States	France
Computer	60	50
Wine	20	25

a. The opportunity cost of a computer in France is __________.

b. The opportunity cost of a computer in the United States is __________.

c. The opportunity cost of one unit of wine in France is __________.

d. The opportunity cost of one unit of wine in the United States is __________.

e. France possesses comparative advantage in the production of __________.

f. The United States possesses comparative advantage in the production of __________.

Please answer with a minimum of 75 words

Answer 1

Answer
a. The opportunity cost of a computer in France is 2 unit of wine.

The opportunity cost of production of a good =required hours to produce one unit of the good/ required hours to produce one unit of other good
The opportunity cost of a computer in France=Hours required to produce computer / hours required to produce wine
=50/25=2

b. The opportunity cost of a computer in the United States is 3 units of wine.

The opportunity cost of a computer in the United States=60/20
=3

c. The opportunity cost of one unit of wine in France is 0.5 unit of computer.

The opportunity cost of one unit of wine in France=25/50=1/2=0.5

d. The opportunity cost of one unit of wine in the United States is 0.33 unit of computer

The opportunity cost of one unit of wine in the United State=20/60=1/3=0.33

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The comparative advantage depends on the lower opportunity cost. It means the country can produce the good giving up lower production of other good.

e. France possesses a comparative advantage in the production of computers.
France has a lower opportunity cost in the production of computers, so it has a comparative advantage in computers

f. The United States possesses a comparative advantage in the production of wine.
The US has a lower opportunity cost in the production of Wine, so it has a comparative advantage in the production of wine.