Assume that both the United States and Germany produce beef and computers. The U.S. can produce 200 computers or 1,000 pounds of beef per day. Germany can produce 500 computers or 250 pounds of beef per day. What is the opportunity cost of beef and computer chips in each country? In which good does each country have a comparative advantage? What is the range for mutually beneficial trade in
computers?
What will be an ideal response?
In the U.S., the opportunity cost of computers is 5 pounds of beef. The opportunity cost of a pound of beef is 1/5 computer. In Germany, the opportunity cost of a computer is 1/2 pound of beef. The opportunity cost of a pound of beef is 2 computers. Since 1/5 is less than 1/2, the U.S. has a comparative advantage in beef, and likewise, Germany has a comparative advantage in computers. For both nations to benefit, a computer must trade for between 1/5 and 1/2 pounds of beef.
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Money is an invention of government
Indicate whether the statement is true or false