Question

Suppose that in Mexico, it takes four labor hours to produce one shirt and 10 labor hours to produce one computer. Suppose that in the United States, it takes three labor hours to produce one shirt and x labor hours to produce one computer. Which of the following values of x will give Mexico the comparative advantage in the production of computers?
a. Eight
b. Five
c. Two
d. Six

Answer 1

Answer:

b,c,d

Explanation:

A country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries

The opportunity cost of producing a computer for Mexico= 4/10 = 0.4

for Mexico to have a comparative advantage in the production of computers, its opportunity cost for producing computers has to be lower.

we would try each of the options to know which would yield the higher opportunity cost for US

3 / 8 = 0.375

3 / 5 = 0,6

3/2 = 1.5

3 / 6 = 0.5

5, 2 AND 6 would give Mexico the comparative advantage