Answer to Question #99833 in Macroeconomics for Tiffany

Question

1. Using a certain quantity of resources, workers in the fictitious country of Iguania can produce four bottles of penicillin or 12 loaves of bread. Using the same resources, workers in another fictitious country, Chamelia, can produce six bottles of penicillin or eight loaves of bread.
a. Calculate the opportunity cost of producing each good in each country.
b. Which country has comparative advantage in the production of which type of good?

Answer 1

1.In Iguania,the opportunity cost of getting one botttle of penicilin will cost 3 loaves of bread.on the other hand,in chamelia, the opportunity cost of producing a botttle of penicilin will be equal to 1.3 loaves of bread

2.Therefore,Chamelia has a comparative advantage of producing penicilin whereas Iguania has comparative advantage in bread production