5 Absolute advantage and comparative advantage Aa Aa suppose

5. Absolute advantage and comparative advantage Aa Aa suppose you have the following information on the marginal product of labor in rice production and apparel production in Japan and Thailand: Marginal Product of Labor Thailand Japan Rice (bushels per hour) 30 Apparel (units per hour) 15 Complete the following table by computing opportunity costs of each good in terms of units of another good for both countries: Japan Thailand opportunity cost of rice (units of apparel per bushel) opportunity cost of apparel (bushels of rice per unit) The information given suggests that Japan has an absolute advantage in the production of and that Thailand has an absolute advantage in the production of The information given suggests that Japan has a comparative advantage in the production of and Thailand has a comparative advantage in the production of

Solution

opportunity cost of rice for Japan = 30/12 = 2.5

opportunity cost of rice for Thailand = 15/30 = 0.5

opportunity cost of apparel for Japan = 12/30 = 0.4

opportunity cost of apparel for Thailand = 30/15 = 2

Japan has a absolute advantage in apparel and thailand in rice.

Japan has a comparative advantage in apparel and thailand in rice.