Question

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 an absolute advantage in jellybean production?

Answer 1

Answer: Neither country have a absolute advantage in jellybean production.

Explanation:

Absolute Advantage: A country has a absolute advantage in producing a commodity if the production of that commodity requires less labor hours than the country.

In this question, neither country is having absolute advantage in jellybean production because in both the countries labor hour requirement in producing a pound of jellybean is 1 hour.

Therefore, labor hour requirement is same in both countries, so, neither country is having absolute advantage in jellybean production.