Question

Question 4 (4 points) In a single year, the US can produce 30 soybeans or 150 avocados. Mexico can produce 15 soybeans or 60 avocados. Suppose Mexico experiences a technological advancement that allows Mexico to produce 90 units of avocados. 1) With the technological advancement, what is the opportunity cost of producing 1 soybean in terms of avocados for Mexico? (Only put numbers) 2) With the technological advancement, what is the opportunity cost of producing 1 avocado in terms of soybeans for Mexico? (Only put numbers and round up to two decimal points example, 5.98 or 4.13. If you put in fraction terms the system will not recognize your answer) 34 With the technological advancement, which country has comparative advantage on the production of soybeans? US or Mexico? 4) With the technological advancement, which country has comparative advantage on the production of avocados? US or Mexico? Blank # 1 Blank # 2 Blank #3 Blank #4

Answer 1

Ans)

	Soybean	Avocados
Mexico	15	90
US	30	150

Comparative advantage is when one can produce good with less opportunity cost.

1) Opportunity cost of soybean in Mexico = avocado sacrificed ÷ soybean gained = 90÷15 = 6

2) Opportunity cost of avocado in Mexico = soybean sacrificed ÷ avocado gained = 15÷90= 0.17

3) Opportunity cost of soybean in US = avocado sacrificed ÷ soybean gained = 150÷30 = 5

Opportunity cost of avocado in US = soybean sacrificed ÷ avocado gained = 30÷150 = 0.2

Since opportunity cost of producing soybean is less in US, it has comparative advantage in producing soybean. US

4) Since opportunity cost of avocado is less in Mexico, it has comparative advantage in avocado. MEXICO