Comparative Advantage There are two countries in the world. There are also only two different...
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Finance
Comparative Advantage
There are two countries in the world. There are also only two different types of goods produced, food and clothing. Each country has the same amount of inputs (i.e. labor, capital, raw materials, etc.), which amounts to 100,000 units of input. Below is a chart that lists out how many units of output each country could create if they created just one type of good. For example, if Country A produced ONLY food, then with 100,000 units of input they could produce 300,000 pounds of food.
Country
Clothing(yard)
Food(LBS)
A
180,000
300,000
B
240,000
900,00
Which country has the relative comparative advantage of producing food? Why?
Which country has the relative comparative advantage of producing clothing? Why?
Ignoring the numbers in the above chart (i.e. think conceptually) if the slope for country Bs food production is steeper than country As food production, then which country has the relative comparative advantage in producing food?
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