Question

Assume there are two countries (France and the United States) and two goods (Wine and Cheese). In France, labor productivity in Wine is 40 bottles per hour and 30 kilos per hour in Cheese. In the US, labor productivity in Wine is 12 bottles per hour and 12 kilos per hour in Cheese. Given this information, which country has the comparative advantage in Cheese

Answer 1

Answer:

United States

Explanation:

A comparative advantage results when a country's opportunity cost of producing good X is lower than the opportunity cost of producing good X in another country.

France

Opportunity cost of producing wine = 30/40 = 0.75 kilos of cheese

Opportunity cost of producing cheese = 40/30 = 1.33 bottles of wine

United States

Opportunity cost of producing wine = 12/12 = 1 kilo of cheese

Opportunity cost of producing cheese = 12/12 = 1 bottle of wine

France has a comparative advantage in the production of wine, and the US has a comparative advantage in the production of cheese.