The USand Mexico Can Produce the Amounts of Computer Chips and and Textiles

question 55

Essay

The U.S.and Mexico can produce the amounts of computer chips and textiles indicated in the table below with one unit of land.Each country has 10 units of land.Does either country have an absolute advantage? Which country has a comparative advantage in chip production? Which country has a comparative advantage in textile production? Is it possible for the two countries to benefit from trade?

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Definitions:

Revenues

The total income generated by a company or organization from its activities, before any expenses are subtracted.

Economic Profit

The difference between the total revenues received by a business and the total opportunity costs of all resources used in the production.

Accounting Profit

The net income of a business as calculated by subtracting total expenses from total revenues, according to standard accounting practices.

Savings

Money that is not spent and is set aside for future use, often in a bank account or other financial instrument.