Comparative advantage from supplied labor inputs
A fictional trade model has two countries and two goods. Country A requires two labor hours for one unit of cloth and four for one unit of wine. Country B requires six hours for cloth and eight for wine. Labor is the only input in the stated model, and within each country the opportunity-cost comparison uses these constant requirements. A learner says A must have a comparative advantage in both goods because it uses fewer hours in both. The exercise asks only for the comparative-cost calculation and does not supply preferences, transport costs, distributional effects or a complete actual policy evaluation. Students must distinguish the model result from a guarantee that every person benefits from any particular trade policy.
1. Which country has the lower opportunity cost of cloth?
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A gives up one-half unit of wine for one cloth, while B gives up three-quarters. A has the comparative advantage in cloth.
2. Which country has the lower opportunity cost of wine?
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A gives up two cloth for one wine, while B gives up four-thirds. B has the comparative advantage in wine despite A absolute productivity advantage.