1. Guatemala can produce two goods - coffee and bananas. If it allocates all of its resources to coffee production, it can produce 80 units of coffee and if it allocates all of its resources to bananas, it can make 100 units of bananas. The US can produce 70 units of coffee and 60 units of bananas. 
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3. a. Who has the comparative advantage in banana production? Show your work. 3 points 
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5. b. What good is Guatemala going to import from the US? 2 points c. What will happen to the price of coffee in Guatemala once Guatemala and the US start trading? 
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7. d. What will happen to the price of coffee in the US once Guatemala and the US start trading?

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a To determine who has the comparative advantage in banana production we need to calculate the oppor... View the full answer