Canada and the US both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if
it can produce wheat at a lower opportunity cost than the US. This means that Canada gives up fewer units of computer software to produce one unit of wheat compared to the US. In other words, Canada has a lower opportunity cost of producing wheat than the US.
On the other hand, the US is said to have the comparative advantage in producing computer software if it can produce software at a lower opportunity cost than Canada. This means that the US gives up fewer units of wheat to produce one unit of software compared to Canada. In other words, the US has a lower opportunity cost of producing software than Canada.
Therefore, if Canada can produce wheat at a lower opportunity cost than the US, it has the comparative advantage in producing wheat. If the US can produce computer software at a lower opportunity cost than Canada, it has the comparative advantage in producing software.
Canada has a lower opportunity cost of producing wheat compared to the US. In other words, if Canada chooses to produce wheat, it gives up fewer resources that could have been allocated to producing computer software, compared to the US. To determine if Canada has a comparative advantage in producing wheat, we need to look at the concept of opportunity cost.
Opportunity cost is defined as the value of the next best alternative foregone when a decision is made. In this case, we need to compare the opportunity costs of producing wheat in Canada and computer software in the US.
To find the opportunity cost, we calculate the ratio of the inputs required to produce each good. For example, if producing one unit of wheat in Canada requires 5 units of resources and producing one unit of computer software requires 10 units of resources, the opportunity cost of producing one unit of wheat is 10/5 = 2 units of computer software.
If Canada's opportunity cost of producing wheat is lower than the US, it means that Canada gives up fewer units of computer software to produce the same amount of wheat. In this scenario, Canada would have a comparative advantage in producing wheat.
Conversely, if the US has a lower opportunity cost of producing wheat compared to Canada, the US would have a comparative advantage in wheat production.
Determining the exact opportunity costs and comparing them would require specific data on resource usage and production capabilities in both countries.