Answered: A) With the following data decide which…

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

A) With the following data decide which country has comparative advantage for which. Show your math.

Good A Good B

Country 1 300 30

Country 2 60 90

B) Using the data from above prove both countries can be better off trading with each other than if they do not

C) Why do we use comparative advantage to decide which country produces which good? Support your answer

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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Introduction

Comparative advantage enables us to find out, which nation produces the good at the lowest possible opportunity cost.

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