Scenario 3-2 In country A a worker who works 40 hours can produce 200 pounds of rice or 100 pounds of broccoli. In country B a worker who works 40 hours can produce 160 pounds of rice or 120 pounds of broccoli. Refer to Scenario 3-2. What is the opportunity cost of producing rice? Refer to Scenario 3-2. What is the opportunity cost of producing broccoli? Refer to Scenario 3-2. Which country, if either, has a comparative advantage producing rice? Refer to Scenario 3-2. Which country, if either, has a comparative advantage producing broccoli? Refer to Scenario 3-2. Give a range of prices in terms of pounds of rice per pound of broccoli at which the two countries would be both be willing to trade.

The answer is below

Explanation:

1) Opportunity cost of producing rice:

For country A, opportunity cost of producing rice = 100 pounds of broccoli / 200 pounds of rice = 1/2 pounds of broccoli

For country B, opportunity cost of producing rice = 120 pounds of broccoli / 160 pounds of rice = 3/4 pounds of broccoli

Opportunity cost of producing broccoli:

For country A, opportunity cost of producing broccoli = 200 pounds of rice / 100 pounds of broccoli = 2 pounds of rice

For country B, opportunity cost of producing broccoli = 160 pounds of rice / 120 pounds of broccoli = 4/3 pounds of rice

2) The country with comparative advantage is the country with lower opportunity cost.

Country A has a comparative in producing rice (1/2 pounds of broccoli < 3/4 pounds of broccoli)

Country B has a comparative in producing broccoli (4/3 pounds of rice <  2 pounds of rice)

3) For better off trade, the price should lie between two different opportunity costs.

Therefore, the price per pound of broccoli in terms of pounds of rice should lie between 4/3 and 2 pounds of rice  

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