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Question:

The country of Hokah uses 30 units of labor to produce a unit of cheese and 35 units of labor to produce a unit of leather. The country of Ymer uses 25 units of labor to produce a unit of check and 20 units of labor to produce a unit of leather. Which of the following statements is most accurate!

A Ymer’s opportunity cost of one unit of leather is 0.80 units of cheese.
Explaination

The opportunity cost of one unit of leather for Ymer is 20 / 25 = 0.80 units of cheese, and the opportunity cost of one unit of cheese is 25 / 20 = 1.25 units of leather. The opportunity cost of one unit of cheese for Hokah is 30 / 35 = 0.86 units of leather, and the opportunity cost of one unit of leather is 35 / 30 = 1.167 units of cheese. Ymer has an absolute advantage in both cheese and leather, but has a comparative advantage only in leather.