Unit labor requirements per one unit of good Calculate oppor

Unit labor requirements per one unit of good. Calculate opportunity cost ofr each good and each country. Which country has comparative advantage in producing Good X? Which country has comparative advantage in producing Good Y?

Solution

Opportunity cost is a theory in microeconomics that measures the value of two alternative choices to show what will be lost in the pursuit of one of these options.

The basic formula for opportunity cost is:

what you are sacrificing / what you are gaining = the opportunity cost...

Home Counttry has compitative advantage in producing good X

Home Counttry has compitative advantage in producing good Y

	HOME	FOREIGN		opportunity Cost for HOME
X	1	4	1/4	0.25
Y	3	12	3/12	0.25