Answer and Explanation:
As it is given that
1. For each unit of labor, Alabama will generate 3 units of chicken.
Thus Alabama can produce a maximum of 27 units of chicken with 9 units of labor.
2. With every unit of labor, Alabama will generate 7 units of cotton.
Thus Alabama can produce a maximum of 63 units of cotton with 9 units of labor.
For each unit of labor, Mississippi will generate 4 units of chicken.
Therefore Mississippi can produce a maximum of 36 units of chicken with 9 units of labor.
For each unit of labor, Mississippi will produce 6 units of cotton.
While Mississippi can produce up to 54 units of cotton with 9 units of labor.
Alabama could be seen producing more cotton than Mississippi using all the labor while using all the labor Mississippi can produce more chicken than Alabama.
Hence,
For producing chicken, Mississippi has the absolute advantage
For producing cotton, Alabama has the absolute advantage
Now
Albama's opportunity cost for generating a chicken unit is
= (7 ÷ 3)
= 2.33 units of cotton.
Albama's opportunity cost for generating a cotton unit is
= (3 ÷ 7)
= 0.43 units of chicken.
Mississippi's opportunity cost for generating a chicken unit is
= (6 ÷ 4)
= 1.50 units of cotton.
Mississippi's opportunity cost of generating a cotton unit is
= (4 ÷ 6)
= 0.67 units of chicken
Therefore
Alabama can produce cotton relatively to Mississippi at a lower cost of opportunity.
In comparison with Alabama, Mississippi can produce chicken at lower opportunity costs.
Hence, we can conclude that
Mississippi has a competitive advantage for chicken production.
Alabama has a competitive advantage in cotton production.
Mississippi is supposed to grow chicken and Alabama is supposed to make cotton.
