Assume that two individuals, Maya and Nate, have equal amounts of resources. Maya can produce 30 pounds of Tim Horton's coffee or 10 stuffed koala bears, or any combination, as shown by figure above. Nate can produce 40 pounds of Tim Horton's coffee or 40 stuffed koala bears, or any combination, as shown by figure above. Which person has an absolute advantage in the production of stuffed koala bears? In the production of Tim Horton's coffee? Explain how you determined your answer. Which person has a comparative advantage in the production of stuffed koala bears? Using the concept of opportunity cost, explain how you determined your answer. If the two countries specialize and trade with each other, which country will import Tim Horton's coffee? Explain why. If the terms of trade are such that one pound of Tim Horton's coffee can be exchanged for one stuffed koala bear, explain how Maya will benefit from such trade. Assume that Nate's production of Tim Horton's coffee doubles, due to a major increase in (a) (b) (c) (d) (e)
Assume that two individuals, Maya and Nate, have equal amounts of resources. Maya can produce 30 pounds of Tim Horton's coffee or 10 stuffed koala bears, or any combination, as shown by figure above. Nate can produce 40 pounds of Tim Horton's coffee or 40 stuffed koala bears, or any combination, as shown by figure above. Which person has an absolute advantage in the production of stuffed koala bears? In the production of Tim Horton's coffee? Explain how you determined your answer. Which person has a comparative advantage in the production of stuffed koala bears? Using the concept of opportunity cost, explain how you determined your answer. If the two countries specialize and trade with each other, which country will import Tim Horton's coffee? Explain why. If the terms of trade are such that one pound of Tim Horton's coffee can be exchanged for one stuffed koala bear, explain how Maya will benefit from such trade. Assume that Nate's production of Tim Horton's coffee doubles, due to a major increase in (a) (b) (c) (d) (e)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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