Question

Guatemala has A. a comparative advantage in orange production. B. a comparative advantage in banana production. C. an absolute advantage in banana production. D. an absolute advantage in orange production.

Answer 1

Answer:

B. a comparative advantage in banana production

Attached table with missing information:

Explanation:

Guatemala's economy opportunity cost:

50 orange / 100 banana = 0.5 opportunity cost of bananas

100 orange /50 banana = 2 opportunity cost of orange

Mexico's economy opportunity cost:

200 orange /200 banana = 1 opportunity cost of bananas

200 banana /200 orange = 1 opportunity cost of orange

The opportunity cost for bananas (production of orange resigned) is lower in Guatemala than in Mexico's. Thus there is a comparative advantage.