QuestionJune 5, 2025

In the given example, what product should Chile produce? Neither wine or microchips Wine Microchips Both wine and microchips

In the given example, what product should Chile produce? Neither wine or microchips Wine Microchips Both wine and microchips
In the given example, what product should Chile produce?
Neither wine or microchips
Wine
Microchips
Both wine and microchips

Solution
4.7(299 votes)

Answer

Wine Explanation 1. Determine Comparative Advantage Chile should produce the product for which it has a comparative advantage, meaning lower opportunity cost compared to other countries. 2. Analyze Opportunity Costs Compare the opportunity costs of producing wine and microchips in Chile versus another country. If Chile can produce one product at a lower opportunity cost than the other, it should specialize in that product.

Explanation

1. Determine Comparative Advantage<br /> Chile should produce the product for which it has a comparative advantage, meaning lower opportunity cost compared to other countries.<br />2. Analyze Opportunity Costs<br /> Compare the opportunity costs of producing wine and microchips in Chile versus another country. If Chile can produce one product at a lower opportunity cost than the other, it should specialize in that product.
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