Answer to Question #103211 in Macroeconomics for karo

Question

Initially, suppose Arcadia uses 1 million hours of labor per month to produce jeans and 3 million hours per month to produce rye, while Felicidad uses 3 million hours of labor per month to produce jeans and 1 million hours per month to produce rye. Consequently, Arcadia produces 8 million pairs of jeans and 48 million bushels of rye, and Felicidad produces 15 million pairs of jeans and 20 million bushels of rye. Assume there are no other countries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of jeans and rye it produces.
Arcadia's opportunity cost of producing 1 pair of jeans is of rye, and Felicidad's opportunity cost of producing 1 pair of jeans is of rye. Therefore, has a comparative advantage in the production of jeans, and has a comparative advantage in the production of rye.

Answer 1

Arcadia's opportunity cost of producing 1 pair of jeans is 48/8 = 6 bushels of rye, and Felicidad's opportunity cost of producing 1 pair of jeans is 20/15 = 1.33 of rye. Therefore, Felicidad has a comparative advantage in the production of jeans, and Arcadia has a comparative advantage in the production of rye.