Question

3. Please complete the following opportunity cost table. (Hint: In order to produce one unit of Soybeans how many Avocados must U.S./Mexico give up and in order to produce one unit of Avocados how much Soybeans must U.S./Mexico give up.) (40 Points)

Opportunity Cost Table

	usa	mexico
soybeans	3 Avacado	4 Avacado
Avacados	0.33 Soybeans	0.25 Soybeans

4. Based on the completed Opportunity Cost Table which country has a comparative advantage in Soybean production? (10 Points)

5. Based on the completed Opportunity Cost Table which region has a comparative advantage in Avocado production? (10 Points)

If Mexico experiences a technological advancement that allowed it to produce 30 units of Soybeans would your answer in #4 and #5 change, if at all? If so, how? (20 Points)

Answer 1

	Soybeans in terms of giving up avocado	Avocacdo in terms of giving up soybeans
U.S.	0.33/3=0.11	3/0.33=9.0909
Mexico	0.25/4=0.0625	4/0.25=16
if Mexico produces 30 Soybeans	0.25/30=0.0083	30/0.25=120
Mexico has lower opportunity cost (comparative advantage) in the production of Soybeans in terms of giving up Avocado (0.0625), so it should produce Soybeans.
U.S. has lower opportunity cost (comparative advantage) in the production of Avocado in terms of giving up Soybeans (9.0909), so it should produce Avocados.
The answer will be the same if Mexico produces 30 soybeans since the opportunity cost in terms of Avocado will be much lower at 0.0083.