Question

Suppose that Canada and the United States both produce maple syrup and honey, which sell for the same prices in both countries. These are the combinations of the two goods that each country can produce in one day using the same amounts of capital and labor: Canada United States Honey (in Maple Syrup Honey (in Maple Syrup tons) (in tons) 60 tons) (in tons) 0 0 50 10 40 20 30 10 20 30 40 30 20 40 10 50 0 45 30 15 0 Step 2: Answer question (a) by calculating who has a comparative advantage in each activity. The United States' opportunity cost of producing one ton of honey is ton(s) of maple syrup, and Canada's opportunity cost of producing one ton of honey is ton(s) of maple syrup. (Enter your responses rounded to two decimal places.)

Answer 1

The United States has a comparative advantage in producing honey with an opportunity cost of 0.5 tons of maple syrup per ton of honey, while Canada's opportunity cost is 1 ton of maple syrup per ton of honey.

Step-by-step explanation:

To determine who has a comparative advantage in producing honey, we need to calculate the opportunity cost for Canada and the United States in terms of maple syrup. The United States can produce a maximum combination of 50 tons of honey and no maple syrup or 0 tons of honey and 45 tons of maple syrup. To find the opportunity cost of producing one ton of honey in the United States, we observe the change in syrup production as honey production increases by 10 tons (from 40 to 50). The syrup production decreases by 5 tons (from 5 to 0). Thus, the opportunity cost of producing one ton of honey is 0.5 tons of maple syrup (5 tons syrup / 10 tons honey).

For Canada, we can observe the data given that 20 tons of honey can be produced with a reduction in syrup production from 40 to 30 tons. The opportunity cost for producing an additional 10 tons of honey (from 10 to 20) results in the loss of 10 tons of maple syrup. This means the opportunity cost of one ton of honey is 1 ton of maple syrup (10 tons syrup/10 tons honey).

Since the United States has a lower opportunity cost of producing one ton of honey (0.5 tons of maple syrup) compared to Canada's higher opportunity cost (1 ton of maple syrup), the United States has the comparative advantage in producing honey.