Question

Two countries, Sportsland and Foodland, have similar total quantities of labor, capital, and natural resources. Both can produce two goods, figs and footballs. Sportsland’s resources are particularly well suited to the production of footballs but are not very productive in producing figs. Foodland’s resources are very productive when used for figs but are not capable of producing many footballs. In which country is the cost of additional footballs generally greater? Explain.

Answer 1

Both countries have same available inputs . Both produce two goods figs and football . Since Sportsland resources are well suited for football we can say that it has a Comparative Advantage in football .

Similarly , we can say that Foodland has a Comparative advantage in manufacturing figs .

So the cost of production of an additional football will be lower for Sportsland , the relatively lesser opportunity cost provides a comparative advantage .

So the cost of producing an additional football in terms of figs is generally greater for Foodland .