Question

Suppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below.

United States

Mexico

Hamburgers​ (in tons)	Tacos​ (in tons)	Hamburgers​ (in tons)	Tacos​ (in tons)
0	144	0	120
80	96	8	80
160	48	16	40
240	0	24	0

Which country has an absolute advantage in producing​ tacos? 

The United States

Mexico

.Which country has a comparative advantage in producing​ tacos?  

The United States

Mexico

.Suppose the United States is currently producing 160 tons of hamburgers and 48 tons of tacos and Mexico is currently producing 16 tons of hamburgers and 40

tons of tacos. If the United States and Mexico each specialize in producing only one good​ (the good for which each has a comparative​ advantage), then a total of

additional​ ton(s) of hamburgers can be produced for the two countries combined ​(enter a numeric response using an​ integer) and a total of

additional​ ton(s) of tacos can be produced.

Answer 1

Absolute Advantage:

Absolute advantage is the ability of a country to produce a good or service at a lower per unit cost as compared to any other country that produces same good or service.

1. United States has an absolute advantage in the production of Tacos because it is able to produce more Tacos with the same resources.

Comparative Advantage

A country has a comparative advantage in producing that good if the opportunity cost of producing that good is lower in that country as compared to another country.

United States:

144 Tacos = 240 Hamburgers

1 Taco = 240/144 = 1.67 hamburgers

Mexico:

120 Tacos = 24 Hamburgers

1 Taco = 24/120 = 0.2 hamburgers

2. Mexico has comparative advantage in the production of Tacos because it has lower opportunity cost of producing tacos.

After specialization, United States produce only hamburgers while Mexico produces only Tacos.

Total production of Hamburgers = 240

Total production of Tacos = 120

Additional tons of hamburgers = 240 - (160 + 16) = 240 - 176 = 64

Additional tons of tacos = 120 - (48 + 40) = 120 - 88 = 32