Question

In Germany, one worker can produce one cuckoo clock or one beer mug. In Taiwan, one worker can produce two cuckoo clocks or three beer mugs. Who has the comparative advantage in each good

Answer 1

The country that has a  comparative advantage in the production of cuckoos is Germany.

The country that has a  comparative advantage in the production of beer mugs is Taiwan.

A country has a comparative advantage in the production of a good if it produces a good at a lower opportunity cost when compared with other countries.

Germany:

Opportunity cost in the production of cuckoo = 1/1 = 1

Opportunity cost in the production of beer mug = 1 /1 = 1

Taiwan:

Opportunity cost in the production of cuckoo = 3/2 = 1.5

Opportunity cost in the production of beer mug = 2/3 = 0.7

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