Another Look at Comparative Advantage

Which country has an absolute advantage in producing computers?

• Mexico

• United States

• Neither

• Both

If trade decisions were based solely on absolute advantage, what would be the outcome between Mexico and the United States regarding computers and shirts?

• The United States would import both goods from Mexico

• Mexico would import both goods from the United States

• Both countries would specialize and trade

• No trade would occur

Martha Stewart has an absolute advantage in ironing her own shirts. Why is it generally not beneficial for her to iron her own shirts?

• She lacks the necessary equipment

• Her business would suffer due to time spent ironing

• She prefers to delegate all household chores

• Ironing is a physically demanding task

Based on the provided labor units, what is the opportunity cost for Mexico to produce one computer?

• 2 shirts

• 6 shirts

• 1/6 of a shirt

• 12 shirts

What is the opportunity cost for Mexico to produce one computer?

• 1/6 of a shirt

• 1 shirt

• 6 shirts

• 1/6 of a computer

Based on opportunity costs, which country has a comparative advantage in producing shirts?

• Mexico

• United States

• Both countries have an equal advantage

• Neither country has an advantage

If Mexico and the United States each have 24 units of labor and each country devotes 12 units of labor to producing computers and 12 units to producing shirts, what is the total world production of computers?

• 1 computer

• 12 computers

• 13 computers

• 24 computers

Suppose Mexico specializes in producing shirts (using all 24 labor units for shirts) and the United States allocates 14 units of labor to computers and 10 units to shirts. What is the total world production of shirts?

• 10 shirts

• 12 shirts

• 22 shirts

• 24 shirts