Country X and Country Y are neighbours. Both Country X and Country Y can produce two goods: food and clothing. In one week, Country X can produce 4,400 clothing units or 2,200 food units, or a mix of the two. In one week, Country Y can produce 5,000 clothing units or 2,000 food units, or a mix of the two. For both Country X and Country Y, their individual trade-offs between clothing units and food units are constant, regardless of how they allocate their time. Currently, Country X produces 2,400 clothing units and 1,000 food units per week while Country Y produces 2,500 clothing units and 1,000 food units per week. a. How is absolute advantage different from comparative advantage? . b. Which country has the absolute advantage in food production? Which country has the absolute advantage in clothing production? Briefly explain.

Country X and Country Y are neighbours. Both Country X and Country Y can produce two goods: food and clothing. In one week, Country X can produce 4,400 clothing units or 2,200 food units, or a mix of the two. In one week, Country Y can produce 5,000 clothing units or 2,000 food units, or a mix of the two. For both Country X and Country Y, their individual trade-offs between clothing units and food units are constant, regardless of how they allocate their time. Currently, Country X produces 2,400 clothing units and 1,000 food units per week while Country Y produces 2,500 clothing units and 1,000 food units per week. a. How is absolute advantage different from comparative advantage? . b. Which country has the absolute advantage in food production? Which country has the absolute advantage in clothing production? Briefly explain.

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Description: Country X and Country Y are neighbours. Both Country X and Country Y can produce two goods: food andclothing. In one week, Country X can produce 4,400 clothing units or 2,200 food units, or a mix of thetwo. In one week, Country Y can produce 5,000 c

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter3: The Market And Price System

Section: Chapter Questions

Problem 14E

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Q/ Country X and Country Y are neighbours. Both Country X and Country Y can produce two goods: food and clothing. In one week, Country X can produce 4,400 clothing units or 2,200 food units, or a mix of the two. In one week, Country Y can produce 5,000 clothing units or 2,000 food units, or a mix of the two.For both Country X and Country Y, their individual trade-offs between clothing units and food units are constant, regardless of how they allocate their time. Currently, Country X produces 2,400 clothing units and 1,000 food units per week while Country Y produces 2,500 clothing units and 1,000 food units per week. c. Which country has a comparative advantage in food production? Which country has acomparative advantage in clothing production? Illustrate your answer using the PPC and showall the calculations. d. Should Country X and Country Y specialize and trade with one another? Why?
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