COMM 220 Lecture Notes - Lecture 2: Comparative Advantage, Opportunity Cost
21 Oct 2015
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Comm 220 practice problem set 5 solutions. The opportunity cost of 1 kg of tomatoes in canada is 1. 5 kg of potatoes, and in u. s. it is 0. 75 kg of potatoes. U. s. has a comparative advantage in producing tomatoes because fewer potatoes must be given up to produce an extra kg of tomatoes. The opportunity cost of 1 kg of potatoes in canada is 0. 6667 kg of tomatoes, and in u. s. it is. Canada has a comparative advantage in producing potatoes because fewer tomatoes must be given up to produce an extra kg of potatoes. (b) canada produces 30,000 more kg of potatoes and 20,000 fewer in tomatoes. 30,000 fewer kg of potatoes and 40,000 more in tomatoes. The world gains 20,000 kg in tomatoes for a 30,000 kg specialization in potatoes. Canada trades 1 kg of potatoes for 1. 05 kg of tomatoes with u. s. : 11,500 (c) u. s. produces 30,000 more kg of tomatoes and 22,500 fewer in potatoes.
