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ghana and south korea each have 200 units of resources. for ghana, it takes 10 units of resources to produce one ton of cocoa and 13.33 units to produce one ton of rice. for south korea, it takes 40 units to produce one ton of cocoa and 20 resources to produce one ton of rice. which one is not correct?

Respuesta :

Answer:

Ghana has comparative advantage in Cocoa. And, South Korea has comparative advantage in Rice.

Explanation:

Resources needed to produce Cocoa & Rice, in Ghana & South Korea

                          Cocoa            Rice              Trade off Ratio    

Ghana                  10                 13.33             10 : 13.33 = 0.75  

South Korea        40                 20                 40 : 20 = 2    

Comparative Advantage is an economy's ability to produce a good at lower opportunity cost (other good sacrifised) ; than other economy. It happens when economy is relatively more productive in production of that good, than the other good ; compared to other economy.

Ghana is 4 times productive in producing cocoa than South Africa (takes 1/4th resources). But it is comparatively lesser times productive in producing rice than South Korea.

  • Ghana produces cocoa by sacrifising less amount of rice than South Korea (0.75 < 2). So, Ghana has comparative advantage in Cocoa
  • South Korea produces rice by sacrifising less cocoa units i.e = 0.5 (20/40), than Ghana which can produce rice by sacrifising 1.3 (13.33 / 10) cocoa units. So, South Korea has comparative advantage in Rice.

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