Question

Below is a table showing the daily production numbers for 1 worker in both Mexico and Canada. Use these numbers to answer the questions below.

1 worker in Mexico can produce in 1 day	1 worker in Canada can produce in 1 day
10 sodas or 5 pizzas	24 sodas or 8 pizzas

1. What country has the absolute advantage in pizzas? Explain your answer with numbers.

1. What country has the absolute advantage in sodas? Explain your answer with numbers.

1. Determine the opportunity cost of producing 1 pizza in Canada.

1. Determine the opportunity cost of producing 1 pizza in Mexico.

1. Determine the opportunity cost of producing 1 soda in Canada.

1. Determine the opportunity cost of producing 1 soda in Mexico.

1. What country has the comparative advantage in pizzas and, thus, will specialize in pizzas when trading? Explain you answer with numbers.

Answer 1

1. 1 worker in Canada can produce more pizzas in a day than a worker in Mexico. So, Canada has an absolute advantage in pizzas.

2. 1 worker in Canada can produce more sodas in a day than a worker in Mexico. So, Canada has an absolute advantage in sodas.

3. 1 worker in Canada can produce either 8 pizzas or 24 sodas. Therefore, the opportunity cost of 1 pizza in Canada = 24/8 = 3 sodas.

4. 1 worker in Mexico can produce either 5 pizzas or 10 sodas. Therefore, the opportunity cost of 1 pizza in Mexico = 10/5 = 2 sodas.

5. 1 worker in Canada can produce either 8 pizzas or 24 sodas. Therefore, the opportunity cost of 1 soda in Canada = 8/24 = 1/3 pizzas.

6. 1 worker in Mexico can produce either 5 pizzas or 10 sodas. Therefore, the opportunity cost of 1 soda in Mexico = 5/10 = 1/2 pizzas.

7. Mexico has a lower opportunity cost in the production of pizzas. Therefore, Mexico has a comparative advantage in the production of pizzas.