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Greece can produce either 100 bushels of oranges or 20 bushels of tomatoes using all of its available resources, and Turkey can produce either 40 bushels of oranges or 30 bushels of tomatoes using all of its available resources. How many bushels of oranges will Greece produce after specialization and trade, assuming that each country fully specializes in the good in which it has a comparative advantage

Sagot :

Answer:

100 bushels of oranges

Explanation:

A country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries.

for Greece

opportunity cost of producing oranges = 20 / 100 = 0.2

opportunity cost of producing tomatoes = 100/ 20 = 5

For turkey

opportunity cost of producing oranges = 30 / 40 = 0.75

opportunity cost of producing tomatoes = 40 / 30 = 1.33

Greece has a comparative advantage in the production of oranges. If it specialises in the production of oranges, it would produce 100 bushels

Greece has an advantage in producing oranges i.e. 100 bushels of oranges.

What does the opportunity cost?

Opportunity cost is often regarded as an opportunity lost because it means the loss of cost while selecting one alternative in place of another.

Given:          Oranges      or        Tomatoes

Greece  = 100 bushels          20 bushels

Turkey= 40 bushels              30 bushels

1. Calculation for Greece=

opportunity cost of oranges production= 20 / 100 = 0.2

opportunity cost of tomatoes production = 100/ 20 = 52.

2. Calculation for Turkey=

opportunity  cost of oranges production = 30 / 40 = 0.75

opportunity cost of tomatoes production = 40 / 30 = 1.33

By the above calculations, we can say that Greece has a comparative advantage in the production of oranges. If it specializes in producing oranges.

Therefore, the above calculation shows that Greece has an advantage in producing oranges.

Learn more about opportunity costs here:

https://brainly.com/question/17204577

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