Assume that the U.S. has 400 units of K (capital) and 300 units of L (labor) while Mexico has 75 units of K and 125 units of L. In both countries it takes 3K/L to produce each unit of X but only 2K/L to produce each unit of Y. Which nation has the comparative advantage in exporting X? Which nation has the comparative advantage in exporting Y?

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In this case US 400K300... View the full answer