Question

Suppose that a worker in Country A can produce either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can produce either 18 bananas or 6 tomatoes each year. Country B has 400 workers. The workers in Country A should specialize in __________________ because they possess the ___________________ in the production of that good.

Answer 1

In this scenario, workers in Country A should specialize in bananas while workers in Country B should specialize in tomatoes. Country A has the absolute advantage in bananas, and Country B has the absolute advantage in tomatoes.

Step-by-step explanation:

In this scenario, workers in Country A should specialize in bananas because they can produce more bananas per worker compared to tomatoes. They have a higher opportunity cost for producing tomatoes. Workers in Country B should specialize in tomatoes because they can produce more tomatoes per worker compared to bananas. They have a higher opportunity cost for producing bananas.

To determine which country has the absolute advantage in a particular good, we compare the productivity of each country in producing that good. Absolute advantage refers to the ability of a country to produce a good using fewer resources compared to another country.

In this case, the workers in Country A have a comparative advantage in producing bananas because they can produce 25 bananas per worker compared to 18 bananas per worker in Country B. Therefore, Country A has the absolute advantage in bananas.

On the other hand, the workers in Country B can produce 6 tomatoes per worker compared to 5 tomatoes per worker in Country A. Therefore, Country B has the absolute advantage in tomatoes.

Answer 2

Answer: Bananas; Lower opportunity cost

Step-by-step explanation:

In country A:

Opportunity cost of producing a banana =
`(5)/(25)`

= 0.2 tomato

Opportunity cost of producing a tomato =
`(25)/(5)`

= 5 bananas

In country B:

Opportunity cost of producing a banana =
`(6)/(18)`

= 0.33 tomato

Opportunity cost of producing a tomato =
`(18)/(6)`

= 3 bananas

Hence, workers in country A should specialize in the production of Bananas because the opportunity cost of producing a banana is lower than the country B.