Question

Absolute v. comparative advantage activity this chart shows how many units of tractors and cotton workers can produce in the united states and canada. output of a worker in one week spain bolivia tractors 50 units 30 units cotton 120 units 120 units 1. the absolute advantage in tractor production is held by ________________. 2. the absolute advantage in cotton production is held by ________________. 3. what is the opportunity cost in spain of producing one unit of tractors? (remember to quote this in terms of what was given up.)

Answer 1

Answer: a). Spain

b). none

c). 2.4

Explanation: a). Absolute advantage occurs when a country produces more of a good than the other country. In this case, Spain produces 50 units of Tractors while, Bolivia produces only 30 units of Tractors. Thus, Since Spain is producing more it has an absolute advantage in Tractors.

b). Both the countries are producing equal units of Cotton. Thus, we can say that none of them has an absolute advantage in cotton production.

c. Opportunity cost is the cost of the lost alternative. When Spain produces Tractors it is sacrificing production of Cotton. So, opportunity cost on 1 unit of Tractor will be,

$Opportunity cost = \frac{120}{50} =2.4$

Thus, 2.4 units of cotton which is given up is the opportunity cost of Spain for producing 1 unit of Tractor.