Chile and Argentina each produce jellybeans and peanut butter, using labor as their only resource. Each country has 1,000 hours of labor. In Chile, an hour produces a pound of jellybeans and 2 hours produce a pound of peanut butter. In Argentina, an hour produces a pound of jellybeans and 3 hours produces a pound of peanut butter. When they do not trade with each other, Chile consumes 600 pounds of jellybeans and 200 pounds of peanut butter, and Argentina consumes 400 pounds of jellybeans and 200 pounds of peanut butter. Which country has a comparative advantage in jellybean production?

Question

Quizplus · Accepted Answer

Argentina has a comparative advantage in jellybean production because it can produce jellybeans at the same rate as Chile (1 hour per pound) but has a higher opportunity cost for producing peanut butter (3 hours per pound compared to Chile's 2 hours per pound), making it relatively more efficient for Argentina to specialize in jellybeans.

Chile and Argentina Each Produce Jellybeans and Peanut Butter, Using