The United States and Canada both produce cars and beer. The table below shows the production possibilities per worker in each country. For example, one worker in the US produces 8 cars or 10 cans of beer per week. Labor ForceCarsBeerUnited States200810Canada1002014Which country has a comparative advantage in beer production? Question 4 options: United States Canada

Comparative advantage occurs when a country or an individual can produce the good at a lower opportunity cost.US can either make 10 beer or 8 cars US opportunity cost in making beer = 8/10 = 0.8 cars Canada can either produce 14 beer or 20 car Canada’s opportunity cost in making beer = 20/14 = 1.4 Since US has a lower opportunity of producing beer so it has a comparative advantage in producing beer. Ans) the correct option is a) united states

Answered: The United States and Canada both…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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The United States and Canada both produce cars and beer. The table below shows the production possibilities per worker in each country. For example, one worker in the US produces 8 cars or 10 cans of beer per week.

	Labor Force	Cars	Beer
United States	200	8	10
Canada	100	20	14

Which country has a comparative advantage in beer production?

Question 4 options:

	United States
	Canada

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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