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Situation: Brazil and Chile can produce cloth and wheat. In Chile, the labor requirement for a...

Situation: Brazil and Chile can produce cloth and wheat. In Chile, the labor requirement for a yard of cloth is 6 hours while the requirement for a bushel of wheat is 9 hours. In Brazil, the requirement for a yard of cloth is 6 hours while that for a bushel of wheat is 10 hours.

Question: Which country has absolute advantage in wheat? In cloth?

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Answer #1

No country has absolute advantage in cloth since labor requirement for a yard of cloth is 6 hours for both countries.

Chile has absolute advantage in wheat since it has lower labor requirement to produce 1 bushel of wheat as compared to that of Brazil.

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