Question

Assume France and Mali can both produce grain and dates, and that the only limited resource is the farming labor force, meaning that land, water, and all other resources are plentiful in both countries.

Each farmer in France can produce 10 metric tons of grain or 5 metric tons of dates in a season. Each farmer in Mali can also produce 10 metric tons of grain or 25 metric tons of dates. Please answer the four questions below.
1. Which country has the absolute advantage in producing dates?
2. Which country has the absolute advantage in producing grain?
3. Which country has the competitive advantage in producing dates?
4. Which country has the comparative advantage in producing grain?

Answer 1

In France:

Farmer can produce = 10 metric tons of grain or 5 metric tons of dates in a season

In Mali:

Farmer can produce = 10 metric tons of grain or 25 metric tons of dates.

(1) Mali has the absolute advantage in producing dates because Mali produces more metric tons of dates than France from the same level resources.

(2) No country has an absolute advantage in producing grain because same amount of grain were produced by both the countries with the same level of resources.

(3) Opportunity cost of dates in France =
`(10)/(5)`

= 2 grain

Opportunity cost of dates in Mali =
`(10)/(25)`

= 0.4 grain

Therefore, Mali's opportunity cost of producing dates is lower than France, so Mali has a comparative advantage in producing dates.

(4) Opportunity cost of grain in France =
`(5)/(10)`

= 0.5 dates

Opportunity cost of grain in Mali =
`(25)/(10)`

= 2.5 dates

Therefore, France's opportunity cost of producing grains is lower than Mali, so France has a comparative advantage in producing grains.