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Chapter 33: Q. 18. (page 804)

Why does the United States not have an absolute advantage in coffee?

Short Answer

Expert verified

Because of the adverse climate conditions which leads to quite expensive and difficult to engage in coffee cultivation, the United states do not have an absolute advantage in coffee.

Step by step solution

01

Step 1. Meaning of absolute advantage.

It is the ability of a party or individual, or firms, or country to produce a good or service more efficiently than its competitors.

02

Step 2. Reason why United states do not have an absolute advantage in coffee.

Basically, the climate in the United states is not ideal for growing coffee, so countries closer to the equator tend to have a greater absolute advantage.

The United states lacks an absolute advantage in the production of coffee since it would be quite expensive and difficult to engage in coffee cultivation since the coffee tree is not favored by the adverse climate conditions of the country. The coffee tree cannot withstand the low adverse temperatures and extremely high temperature variations in the United states.

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In Germany, it takes three workers to make one television and four workers to make one video camera. In Poland, it takes six workers to make one television and workers to make one video camera.

(a) Who has the absolute advantage in the production of televisions? Who has the absolute advantage in the production of video cameras? How can you tell?

(b) Calculate the opportunity cost of producing one additional television set in Germany and in Poland. (Your calculation may involve fractions, which is fine.) Which country has a comparative advantage in the production of televisions?

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(d) In this example, is the absolute advantage the same as comparative advantage, or not?

(e) In what product should Germany specialize? In what product should Poland specialize?
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