Answer :
To identify an example of comparative advantage for either Country A or Country B over the United States, we need to calculate the opportunity cost for each product in terms of the other product for each country. Opportunity cost measures the cost of producing one item in terms of the units of another item that must be forgone.
Let's analyze the data provided in the table:
1. Calculating Opportunity Costs for the United States:
- Worker hours to produce one barrel of crude oil: 4 hours
- Worker hours to produce one ton of coal: 5 hours
Opportunity Cost for Crude Oil in the United States:
[tex]\[ \text{Opportunity Cost of 1 barrel of crude oil} = \frac{\text{Worker hours to produce crude oil}}{\text{Worker hours to produce coal}} = \frac{4}{5} = 0.8 \text{ tons of coal} \][/tex]
Opportunity Cost for Coal in the United States:
[tex]\[ \text{Opportunity Cost of 1 ton of coal} = \frac{\text{Worker hours to produce coal}}{\text{Worker hours to produce crude oil}} = \frac{5}{4} = 1.25 \text{ barrels of crude oil} \][/tex]
2. Calculating Opportunity Costs for Country A:
- Worker hours to produce one barrel of crude oil: 6 hours
- Worker hours to produce one ton of coal: 5 hours
Opportunity Cost for Crude Oil in Country A:
[tex]\[ \text{Opportunity Cost of 1 barrel of crude oil} = \frac{\text{Worker hours to produce crude oil}}{\text{Worker hours to produce coal}} = \frac{6}{5} = 1.2 \text{ tons of coal} \][/tex]
Opportunity Cost for Coal in Country A:
[tex]\[ \text{Opportunity Cost of 1 ton of coal} = \frac{\text{Worker hours to produce coal}}{\text{Worker hours to produce crude oil}} = \frac{5}{6} \approx 0.833 \text{ barrels of crude oil} \][/tex]
3. Calculating Opportunity Costs for Country B:
- Worker hours to produce one barrel of crude oil: 7 hours
- Worker hours to produce one ton of coal: 3 hours
Opportunity Cost for Crude Oil in Country B:
[tex]\[ \text{Opportunity Cost of 1 barrel of crude oil} = \frac{\text{Worker hours to produce crude oil}}{\text{Worker hours to produce coal}} = \frac{7}{3} \approx 2.333 \text{ tons of coal} \][/tex]
Opportunity Cost for Coal in Country B:
[tex]\[ \text{Opportunity Cost of 1 ton of coal} = \frac{\text{Worker hours to produce coal}}{\text{Worker hours to produce crude oil}} = \frac{3}{7} \approx 0.429 \text{ barrels of crude oil} \][/tex]
4. Comparative Advantage Analysis:
- Crude Oil Production:
- The United States: 0.8 tons of coal per barrel of crude oil.
- Country A: 1.2 tons of coal per barrel of crude oil.
- Country B: 2.333 tons of coal per barrel of crude oil.
Since 0.8 is less than both 1.2 and 2.333, the United States has the comparative advantage in producing crude oil.
- Coal Production:
- The United States: 1.25 barrels of crude oil per ton of coal.
- Country A: 0.833 barrels of crude oil per ton of coal.
- Country B: 0.429 barrels of crude oil per ton of coal.
Since 0.429 is less than both 0.833 and 1.25, Country B has the comparative advantage in producing coal.
The comparative advantage for Country B over the United States is in the production of coal. The opportunity cost of producing one ton of coal in Country B is lower (0.429 barrels of crude oil) compared to the United States (1.25 barrels of crude oil).
Impact of Natural Resource Availability and Use:
The natural resource availability and its efficient use can significantly affect comparative advantage. For example, if Country B has more abundant coal reserves and better technology for coal extraction, it will require fewer worker hours to produce coal. This abundance of coal resources leads to a lower opportunity cost and hence a comparative advantage in coal production. Conversely, if the United States has greater access to oil reserves and efficient technology for crude oil extraction, it requires fewer worker hours for oil production, giving it a comparative advantage in crude oil production.
Let's analyze the data provided in the table:
1. Calculating Opportunity Costs for the United States:
- Worker hours to produce one barrel of crude oil: 4 hours
- Worker hours to produce one ton of coal: 5 hours
Opportunity Cost for Crude Oil in the United States:
[tex]\[ \text{Opportunity Cost of 1 barrel of crude oil} = \frac{\text{Worker hours to produce crude oil}}{\text{Worker hours to produce coal}} = \frac{4}{5} = 0.8 \text{ tons of coal} \][/tex]
Opportunity Cost for Coal in the United States:
[tex]\[ \text{Opportunity Cost of 1 ton of coal} = \frac{\text{Worker hours to produce coal}}{\text{Worker hours to produce crude oil}} = \frac{5}{4} = 1.25 \text{ barrels of crude oil} \][/tex]
2. Calculating Opportunity Costs for Country A:
- Worker hours to produce one barrel of crude oil: 6 hours
- Worker hours to produce one ton of coal: 5 hours
Opportunity Cost for Crude Oil in Country A:
[tex]\[ \text{Opportunity Cost of 1 barrel of crude oil} = \frac{\text{Worker hours to produce crude oil}}{\text{Worker hours to produce coal}} = \frac{6}{5} = 1.2 \text{ tons of coal} \][/tex]
Opportunity Cost for Coal in Country A:
[tex]\[ \text{Opportunity Cost of 1 ton of coal} = \frac{\text{Worker hours to produce coal}}{\text{Worker hours to produce crude oil}} = \frac{5}{6} \approx 0.833 \text{ barrels of crude oil} \][/tex]
3. Calculating Opportunity Costs for Country B:
- Worker hours to produce one barrel of crude oil: 7 hours
- Worker hours to produce one ton of coal: 3 hours
Opportunity Cost for Crude Oil in Country B:
[tex]\[ \text{Opportunity Cost of 1 barrel of crude oil} = \frac{\text{Worker hours to produce crude oil}}{\text{Worker hours to produce coal}} = \frac{7}{3} \approx 2.333 \text{ tons of coal} \][/tex]
Opportunity Cost for Coal in Country B:
[tex]\[ \text{Opportunity Cost of 1 ton of coal} = \frac{\text{Worker hours to produce coal}}{\text{Worker hours to produce crude oil}} = \frac{3}{7} \approx 0.429 \text{ barrels of crude oil} \][/tex]
4. Comparative Advantage Analysis:
- Crude Oil Production:
- The United States: 0.8 tons of coal per barrel of crude oil.
- Country A: 1.2 tons of coal per barrel of crude oil.
- Country B: 2.333 tons of coal per barrel of crude oil.
Since 0.8 is less than both 1.2 and 2.333, the United States has the comparative advantage in producing crude oil.
- Coal Production:
- The United States: 1.25 barrels of crude oil per ton of coal.
- Country A: 0.833 barrels of crude oil per ton of coal.
- Country B: 0.429 barrels of crude oil per ton of coal.
Since 0.429 is less than both 0.833 and 1.25, Country B has the comparative advantage in producing coal.
The comparative advantage for Country B over the United States is in the production of coal. The opportunity cost of producing one ton of coal in Country B is lower (0.429 barrels of crude oil) compared to the United States (1.25 barrels of crude oil).
Impact of Natural Resource Availability and Use:
The natural resource availability and its efficient use can significantly affect comparative advantage. For example, if Country B has more abundant coal reserves and better technology for coal extraction, it will require fewer worker hours to produce coal. This abundance of coal resources leads to a lower opportunity cost and hence a comparative advantage in coal production. Conversely, if the United States has greater access to oil reserves and efficient technology for crude oil extraction, it requires fewer worker hours for oil production, giving it a comparative advantage in crude oil production.
