Question

In one hour of labor input, South Korea can produce either 100 computer chips or 50 bed linens. In the U.S., in one hour of labor input, either 150 computer chips or 100 bed linens can be made. Select the correct response below. Group of answer choices S. Korea has a comparative advantage in computer chip manufacturing. The U.S. has an absolute advantage in bed linen manufacturing. All of these are correct The U.S. has a comparative advantage in bed linen manufacturing. The U.S. has an absolute advantage in computer chips manufacturing.

Answer 1

Answer: All of these are correct

Explanation:

South Korea

Opportunity cost of Computer chips = 50/100 = 0.2 bed linens

Opportunity cost of bed linens = 100/50 = 2 computer chips

USA

Opportunity cost of Computer chips = 100/150 = 0.67 bed linens

Opportunity cost of bed linens = 150/100 = 1.5 computer chips

Country with Comparative advantage in the production of a good is one that incurs the lower opportunity cost.

Country with Absolute advantage is county that produces the most quantity of a good or service.

Therefore;

US has Absolute advantage in both Computer chips and Bed linens.

South Korea has comparative advantage in Computer chips.

US has comparative advantage in bed linen manufacturing.