Consider the following table. Numbers denote hours to produce 1 unit What are th
ID: 1134096 • Letter: C
Question
Consider the following table.
Numbers denote hours to produce 1 unit
What are the world's per-unit gain for bananas if Country A and B specialize according to their absolute advantage?
What are the world's per-unit gain for apples if Country A and B specialize according to their absolute advantage?
In order to answer, ask yourself:
(1) Who the absolute advantage at what?
(2) If Country A and B specialize according to absolute advantage, who gives up the production of bananas? who gives up the production of Apples?
(3) How many units of bananas are gained by the Country specializing in bananas, any time this Country gives up 1 apple?
(4) How many units of apples are gained by the Country specializing in apples, any time this Country gives up 1 banana?
(5) Finally: the world is composed by Country A and Country B together. To find the world's per-unit gain, sum up gains and what we give up for both Country A and Country B, for both bananas and apples.
4 extra bananas; 2.5 extra apples
3 extra bananas; 1.5 extra apples
not enough information
1 extra banana; 1 extra apple
Country A Country B Bananas 1 5 Apples 4 2Explanation / Answer
Ans
A country A in bananas and country B in apples. You have to simply look who utilizes less labour
B country A should give apple production and country B should give bandanna production
C 1/5
D 2/4
Enot enough information as working hours available are not given