B) Comparative Advantage1. Country A has 100 workers and Country B has 100 workers. Every worker in Country A canproduce 6 tons of wheat per year, or can produce 12 tons of corn per year. Every worker in Country Bcan produce 2 tons of wheat per year, or can produce 10 tons of corn per year.a. Which country has an absolute advantage in wheat?b. Which country has an absolute advantage in corn?c. Which country has a comparative advantage in wheat?d. Which country has a comparative advantage in corn?Suppose initially the countries do not trade and Country A has 50 workers producing corn and 50producing wheat. Country B has 30 workers producing corn and 70 producing wheat.Fill out the following table:Country ACountry BCorn ProducedWheat ProducedNow the two countries trade with one another.e. What good does Country A specialize in?f. What good does Country B specialize in?If these countries have all workers produce the product that their country has a comparativeadvantage in, how much do they produce?Country ACorn ProducedWheat ProducedCountry Bg. How much more of each good is produced in total with specialization than when there was notrade? Corn:Wheat:h. Now suppose Country B improves its technology to produce wheat, and now each worker canproduce 4 tons of wheat per year. Are the gains from trade between Country A and Country B higheror lower than before? Why?

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1. Country A has 100 workers and Country B has 100 workers. Every worker in Country A can produce 6 tons of wheat per year, or can produce 12 tons of corn per year. Every worker in Country B can produce 2 tons of wheat per year, or can produce 10 tons of corn per year. a. Which country has an absolute advantage in wheat? b. Which country has an absolute advantage in corn? c. Which country has a comparative advantage in wheat? d. Which country has a comparative advantage in corn?

1. Country A has 100 workers and Country B has 100 workers. Every worker in Country A can produce 6 tons of wheat per year, or can produce 12 tons of corn per year. Every worker in Country B can produce 2 tons of wheat per year, or can produce 10 tons of corn per year. a. Which country has an absolute advantage in wheat? b. Which country has an absolute advantage in corn? c. Which country has a comparative advantage in wheat? d. Which country has a comparative advantage in corn?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

B) Comparative Advantage
1. Country A has 100 workers and Country B has 100 workers. Every worker in Country A can
produce 6 tons of wheat per year, or can produce 12 tons of corn per year. Every worker in Country B
can produce 2 tons of wheat per year, or can produce 10 tons of corn per year.
a. Which country has an absolute advantage in wheat?
b. Which country has an absolute advantage in corn?
c. Which country has a comparative advantage in wheat?
d. Which country has a comparative advantage in corn?
Suppose initially the countries do not trade and Country A has 50 workers producing corn and 50
producing wheat. Country B has 30 workers producing corn and 70 producing wheat.
Fill out the following table:
Country A
Country B
Corn Produced
Wheat Produced
Now the two countries trade with one another.
e. What good does Country A specialize in?
f. What good does Country B specialize in?
If these countries have all workers produce the product that their country has a comparative
advantage in, how much do they produce?
Country A
Corn Produced
Wheat Produced
Country B
g. How much more of each good is produced in total with specialization than when there was no
trade? Corn:
Wheat:
h. Now suppose Country B improves its technology to produce wheat, and now each worker can
produce 4 tons of wheat per year. Are the gains from trade between Country A and Country B higher
or lower than before? Why?

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