Posted by Onessa on .
(Absolute and Comparative Advantage) You have been given the following information concerning the production of wheat and cloth in the United States and United Kingdom:
Labor Hours Required to Produce One Unit
United Kingdom United States
Wheat 2 1
Cloth 6 5
What is the opportunity cost of producing a unit of wheat in the United Kingdom? the United States?
In the UK it costs 6 cloth to get 2 wheat. Ergo, cost for 1 wheat is 3 cloth. In US it cost 5 cloth to get 1 wheat.
Suppose North has 30 million hours of labor in total per year, and South has 20 million hours of labor per year.
a. Which country has an absolute advantage in wine production? Explain