Answer :
Let's analyze the given production possibilities data table for the United States and Italy.
[tex]\[ \begin{array}{|c|c|c|} \hline & \text{Cheese (millions of tons)} & \text{Tomatoes (millions of tons)} \\ \hline \text{United States} & 4 & 2 \\ \hline \text{Italy} & 1 & 1 \\ \hline \end{array} \][/tex]
### Step-by-Step Analysis
1. Absolute Advantage:
- The concept of absolute advantage is when a country can produce more of a good with the same amount of resources compared to another country.
- Cheese:
- The United States can produce 4 million tons of cheese.
- Italy can produce 1 million ton of cheese.
- Conclusion: The United States has an absolute advantage in producing cheese, as it can produce more cheese than Italy.
- Tomatoes:
- The United States can produce 2 million tons of tomatoes.
- Italy can produce 1 million ton of tomatoes.
- Conclusion: The United States has an absolute advantage in producing tomatoes, as it can produce more tomatoes than Italy.
2. Comparative Advantage:
- The concept of comparative advantage is when a country can produce a good at a lower opportunity cost compared to another country.
- To identify comparative advantages, we need to calculate the opportunity cost for each country to produce cheese and tomatoes.
- United States:
- Opportunity cost of producing 1 ton of cheese = number of tons of tomatoes forgone.
- From the table, if the U.S. produces cheese, the maximum is 4 million tons of cheese and 2 million tons of tomatoes. Opportunity cost for 1 ton of cheese = 2 million tons tomatoes / 4 million tons cheese = 0.5 tons of tomatoes.
- Opportunity cost of producing 1 ton of tomatoes = number of tons of cheese forgone.
- Similarly, opportunity cost for 1 ton of tomatoes = 4 million tons cheese / 2 million tons tomatoes = 2 tons of cheese.
- Italy:
- Opportunity cost of producing 1 ton of cheese = number of tons of tomatoes forgone.
- From the table, if Italy produces cheese, the maximum it can produce is 1 million tons of cheese and 1 million ton of tomatoes. Opportunity cost for 1 ton of cheese = 1 million ton tomatoes / 1 million ton cheese = 1 ton of tomatoes.
- Opportunity cost of producing 1 ton of tomatoes = number of tons of cheese forgone.
- Similarly, opportunity cost for 1 ton of tomatoes = 1 million ton cheese / 1 million ton tomatoes = 1 ton of cheese.
- Comparative advantage determined by who has the lower opportunity cost for each good.
- Cheese:
- U.S. opportunity cost: 0.5 tons of tomatoes.
- Italy’s opportunity cost: 1 ton of tomatoes.
- Conclusion: The U.S. has a comparative advantage in producing cheese.
- Tomatoes:
- U.S. opportunity cost: 2 tons of cheese.
- Italy’s opportunity cost: 1 ton of cheese.
- Conclusion: Italy has a comparative advantage in producing tomatoes.
### Final Conclusion
1. Italy does not have an absolute advantage in producing either cheese or tomatoes because the United States can produce more of both goods with the same resources.
2. The United States has an absolute advantage in producing both cheese and tomatoes.
3. The United States and Italy can benefit from specialization and trade based on comparative advantages:
- The United States should specialize in producing cheese.
- Italy should specialize in producing tomatoes.
4. The combination of points leads to the supported statement:
- Both Italy and the United States have a comparative production advantage.
Given these points, the statement supported by the data table is:
Both Italy and the United States have a comparative production advantage.
[tex]\[ \begin{array}{|c|c|c|} \hline & \text{Cheese (millions of tons)} & \text{Tomatoes (millions of tons)} \\ \hline \text{United States} & 4 & 2 \\ \hline \text{Italy} & 1 & 1 \\ \hline \end{array} \][/tex]
### Step-by-Step Analysis
1. Absolute Advantage:
- The concept of absolute advantage is when a country can produce more of a good with the same amount of resources compared to another country.
- Cheese:
- The United States can produce 4 million tons of cheese.
- Italy can produce 1 million ton of cheese.
- Conclusion: The United States has an absolute advantage in producing cheese, as it can produce more cheese than Italy.
- Tomatoes:
- The United States can produce 2 million tons of tomatoes.
- Italy can produce 1 million ton of tomatoes.
- Conclusion: The United States has an absolute advantage in producing tomatoes, as it can produce more tomatoes than Italy.
2. Comparative Advantage:
- The concept of comparative advantage is when a country can produce a good at a lower opportunity cost compared to another country.
- To identify comparative advantages, we need to calculate the opportunity cost for each country to produce cheese and tomatoes.
- United States:
- Opportunity cost of producing 1 ton of cheese = number of tons of tomatoes forgone.
- From the table, if the U.S. produces cheese, the maximum is 4 million tons of cheese and 2 million tons of tomatoes. Opportunity cost for 1 ton of cheese = 2 million tons tomatoes / 4 million tons cheese = 0.5 tons of tomatoes.
- Opportunity cost of producing 1 ton of tomatoes = number of tons of cheese forgone.
- Similarly, opportunity cost for 1 ton of tomatoes = 4 million tons cheese / 2 million tons tomatoes = 2 tons of cheese.
- Italy:
- Opportunity cost of producing 1 ton of cheese = number of tons of tomatoes forgone.
- From the table, if Italy produces cheese, the maximum it can produce is 1 million tons of cheese and 1 million ton of tomatoes. Opportunity cost for 1 ton of cheese = 1 million ton tomatoes / 1 million ton cheese = 1 ton of tomatoes.
- Opportunity cost of producing 1 ton of tomatoes = number of tons of cheese forgone.
- Similarly, opportunity cost for 1 ton of tomatoes = 1 million ton cheese / 1 million ton tomatoes = 1 ton of cheese.
- Comparative advantage determined by who has the lower opportunity cost for each good.
- Cheese:
- U.S. opportunity cost: 0.5 tons of tomatoes.
- Italy’s opportunity cost: 1 ton of tomatoes.
- Conclusion: The U.S. has a comparative advantage in producing cheese.
- Tomatoes:
- U.S. opportunity cost: 2 tons of cheese.
- Italy’s opportunity cost: 1 ton of cheese.
- Conclusion: Italy has a comparative advantage in producing tomatoes.
### Final Conclusion
1. Italy does not have an absolute advantage in producing either cheese or tomatoes because the United States can produce more of both goods with the same resources.
2. The United States has an absolute advantage in producing both cheese and tomatoes.
3. The United States and Italy can benefit from specialization and trade based on comparative advantages:
- The United States should specialize in producing cheese.
- Italy should specialize in producing tomatoes.
4. The combination of points leads to the supported statement:
- Both Italy and the United States have a comparative production advantage.
Given these points, the statement supported by the data table is:
Both Italy and the United States have a comparative production advantage.
