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rizumidancer rizumidancer
wrote...
Posts: 361
Rep: 6 0
2 months ago
Consider the following weekly production possibilities of gloves and hats in Panama and Russia:

RussiaPanama
Gloves20180
Hats80  90

What is each country's opportunity cost of producing gloves and hats? If the countries could, should they trade?
Textbook 

Microeconomics: Principles, Applications, and Tools


Edition: 8th
Authors:
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12061206
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Posts: 291
2 months ago
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Russia's opportunity cost of a glove is 4 hats, while Panama's opportunity cost of a glove is 1/2 of a hat. The opportunity costs of hats are the reciprocals of these. Even though Panama has an absolute advantage in the production of all goods, it will still make sense for Panama to specialize in glove production and trade for hats, as Russia has the comparative advantage in hat production.
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