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Amount of beef or computers produced by one worker in a day
         

                  Canada Japan
Beef                 6        5
Computers        2        4

2. Which country has the absolute advantage in beef production?
3. Which country has the absolute advantage in computer production?
4. Which country has the comparative advantage in beef production?
5. Which country has the comparative advantage in computer production?
6. What are the limits of the terms of trade? Specifically, when is Canada willing to trade with Japan, and when is Japan willing to trade with Canada?

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Related questions

3.In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios.

3-1)Who has the absolute advantage in the production of rubber or radios? How can you tell?

3-2)Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine.) Which country has a comparative advantage in the production of radios?

3-3)Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber?

3-4)In this example, does each country have an absolute advantage and a comparative advantage in the same good, or not?

3-5)In what product should Japan specialize? In what product should Malaysia specialize?

Production per unit of labor hour UK US Wheat 6 1 Furniture 6 3 1. Which country has absolute advantage in the production of Wheat, of Furniture? 2. According to the absolute advantage theory which country will export Wheat?: 3. According to the comparative advantage theory how much is the opportunity cost of Wheat production in UK and in US? 4. According to the comparative advantage theory how much is the opportunity cost of Furniture production in UK and in US? 5. When trade opens according to the comparative advantage theory which country will export wheat? Why? 6. When trade opens according to the comparative advantage theory which country will export Furniture? Why? 7. At autarky price (before trade) what are the relative prices (domestic cost ratios) in UK? 8. At autarky price (before trade) what are the relative prices (domestic cost ratios) in US? 9. If trade between them take place at terms of trade of 1 W for 2 F why each country benefits from trade? Explain.

Consider the following production data for England and Portugal.

England

Portugal

Labor force

25

200

Number of bottles of wine

per worker

40

50

Number of wheels of cheese

per worker

4

1

(a) Which country has an absolute advantage in the production of each good? Which country

has a comparative advantage in the production of each good?

(b) Suppose prices/wages are in terms of wine. Assuming each country spends 50% income on cheese and 50% on wine, with no trade, what is the wage and price of cheese in

each country? What is the total production of wine and cheese in each country?

(c) Suppose each country specializes in their comparative advantage good. After trade, what is the total global production of each good?

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