Question

Poland requires 4 hours of labor to produce 1 ton of coal and 1 hour of labor to produce a bushel of wheat. The Czech Republic requires 6 hours of labor to produce 1 ton of coal and 1 hour of labor to produce a bushel of wheat. Suppose that Poland has 1,000 hours of labor and that it completely specializes according to its comparative advantage. How many units of which product will it produce?

Answer 1

Answer:

Poland has comparative advantage in producing coal , so they will produce 250 tons of coal.

Explanation:

Here for understanding which product should Poland specialize in according to its comparative advantage depends up on the opportunity cost for producing for 1 ton coal . According to the question both Poland and Czech republic can produce a bushel of wheat in 1 hour but the difference comes in the production of coal where Poland takes 4 hour to make 1 ton of coal and Czech republic takes 6 hours to make 1 ton of coal, so from this statement we can take out what is the opportunity cost for producing 1 ton of coal for both countries.

FOR POLAND

Opportunity cost of producing 1 ton of coal = 4 bushes

FOR CZECH REPUBLIC

Opportunity cost of producing 1 ton of coal = 6 bushes

So it is clear that for Poland the opportunity cost for producing 1 ton of coal is less, so they should specialize in producing coal and in 1000 hours they can produce 250 tons of coal.