Author Question: What is a marginal benefit? What will be an ideal response?[br][br][b][color=gray]Question ... (Read 62 times)

K@ · **on:** Jun 29, 2018

What is a marginal benefit?

What will be an ideal response?

Question 2

Using the Figure above for Australia and New Zealand determine which country has the comparative advantage in the production of cotton and which the comparative advantage in the production of wheat.

What will be an ideal response?

macagn · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Marginal benefit is the additional benefit received from continuing with an activity.

Answer to Question 2

We must first calculate the opportunity costs of the production of both goods for both nations. The opportunity cost of cotton in Australia is 1/3 of a ton of wheat for each ton of cotton (600 C = 150W). The opportunity cost of cotton in New Zeland is three tons of wheat (200C = 600W). Therefore, Australia enjoys a comparative advantage in the production of cotton. The opportunity cost of wheat in Australia is therefore 1 wheat = 3 tons of cotton. The opportunity cost of wheat in New Zealand is 1 wheat = 1/3 cotton. Therefore, New Zealand enjoys a comparative advantage in the production of wheat.