1. Determine which country has a comparative advantage in each good. 2. If Country A and Country B each have 100 units of labour, calculate the maximum production of each good for both countries. 3. In the absence of trade, Country B uses 20% of its total labour units to produce steel and the rest to produce oil. Country A uses 60% of its total labour units to produce steel and the rest to produce oil. Calculate how many tonnes of steel and oil can be produced by both countries.
1. Determine which country has a comparative advantage in each good. 2. If Country A and Country B each have 100 units of labour, calculate the maximum production of each good for both countries. 3. In the absence of trade, Country B uses 20% of its total labour units to produce steel and the rest to produce oil. Country A uses 60% of its total labour units to produce steel and the rest to produce oil. Calculate how many tonnes of steel and oil can be produced by both countries.
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter25: The Supply Of And Demand For Productive Resources
Section: Chapter Questions
Problem 9CQ
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Question
1. Determine which country has a comparative advantage in each good.
2. If Country A and Country B each have 100 units of labour, calculate the maximum production of each good for both countries.
3. In the absence of trade, Country B uses 20% of its total labour units to produce steel and the rest to produce oil. Country A uses 60% of its total labour units to produce steel and the rest to produce oil. Calculate how many tonnes of steel and oil can be produced by both countries.
4. Both countries agree that one tonne of steel can be exchanged for one tonne of oil. Calculate the gains after trade is allowed if Country A consumes 30 tonnes of oil domestically.
![Suppose that Country A and Country B have unit labour requirements for producing
one tonne of steel and one tonne of oil shown in the following table:
Steel
Oil
Unit labour requirements
Country A
4
2
Country B
4
5](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcaf70c2b-1338-4e0e-bda0-13fb61a10e47%2Fcc67fa6c-25be-42ca-944b-bd3cd62c67b3%2F2czh3gv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose that Country A and Country B have unit labour requirements for producing
one tonne of steel and one tonne of oil shown in the following table:
Steel
Oil
Unit labour requirements
Country A
4
2
Country B
4
5
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