US/Mexico
Cars 100/50
Beef 300/100
Use above info to answer.
Give the opportunity cost for production of each good in each country and then explain which country should produce cars and which should produce beef.
Opportunity cost is the value of the next best alternative that is forgone when a choice is made. It represents the cost of producing one good in terms of the foregone production of another good.
To calculate opportunity cost, we need to find the ratio of the two goods' production in each country.
For the US:
Opportunity cost of producing cars = Beef produced / Cars produced = 100 / 50 = 2
Opportunity cost of producing beef = Cars produced / Beef produced = 50 / 100 = 0.5
For Mexico:
Opportunity cost of producing cars = Beef produced / Cars produced = 100 / 50 = 2
Opportunity cost of producing beef = Cars produced / Beef produced = 50 / 100 = 0.5
In the US, the opportunity cost of producing cars is 2 units of beef, while the opportunity cost of producing beef is 0.5 units of cars. In Mexico, the opportunity cost is the same.
Based on these opportunity costs, we can determine the comparative advantage of each country. The country that has a lower opportunity cost in producing a particular good has a comparative advantage in that good.
In this case, since the opportunity costs of producing cars and beef are the same for both the US and Mexico, it suggests that there is no clear comparative advantage for either country. Both countries can produce both goods efficiently.
However, other factors such as resource availability, labor skills, technology, and market demand should also be considered to make a more comprehensive decision about which country should specialize in producing cars or beef.