In one minute, Country B can produce either 1,000 TVs and no computers or 500 co

Question

In one minute, Country B can produce either 1,000 TVs and no computers or 500 computers and no TVs. Similarly, in one minute Country C can produce either 2,400 TVs or 600 computers.

A) Compute the opportunity costs of TVs and computers for each country.

B) Which country has a comparative advantage in producing TVs? Which country has a comparative advantage in producing computers?

C) Also, consider the personal computer industry. Do you think the industry has an upward sloping, downward sloping, or horizontal long-run industry supply curve?

Explanation / Answer

A) Opportunity Cost table T.V Computer B 1/2 2 C 1/4 4 [How I computed Opportunity Cost? Suppose i give up 1 unit of T.V. this will release 1/1000 minutes which i can use in Computer. So I can make 1/2 computers in 1/1000 minutes. This is the opportunity cost of T.V. Similarly you can find the opportunity cost of Computer which is just the opposite of O.C of T.V.] B) The country with low opportunity cost has a comparative advantage. So in T.V country C has a comparative advantage And in computer country B has a comparative advantage. C) there should be an upward sloping supply curve. :)

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.