The nations of Pearland and Mangoland produce pears and mangos. In Pearland, there are 300,000 hours of labor available in a month, and it takes 2 hours of labor to produce a barrel of pears, and 4 hours of labor to produce a crate of mangos. In Mangoland, there are 700,000 hours of labor available in a month, and it takes 1 hour of labor to produce a barrel of pears and 1 hour of labor to produce a crate of mangos.
1. Which country has an absolute advantage in each good?
2. What is the opportunity cost of a crate of mangos in Mangoland?
3. What is the opportunity cost of a crate of mangos in Pearland?
4. Which country has a comparative advantage in each good?
5. Which country should specialize in each good?
Answers: 1
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The nations of Pearland and Mangoland produce pears and mangos. In Pearland, there are 300,000 hours...
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