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- What is comparative advantage?scenario Production Advantage and Opportunity CostsAssume there are two countries, the United States and France, and two goods, automobiles andcomputers.The table presented below shows the number of automobiles and computers that the United States andFrance can produce with the same amount of resources.United States FranceAutomobiles 120 100Computers 60 55Source: Pearson Education Inc. 1.1 Which country has an absolute advantage in computer production? Motivate your answer.1.2 Which country has a comparative advantage in the production of automobiles? Motivateyour answer. 1.3 Assume these countries trade with one another under the conditions of free trade. Whichcountry will specialise in the production of automobiles? Motivate your answer. 1.4 If free trade exists between the United States and France, what are the highest and lowestlevels for the price of an automobile (expressed in terms of computers)? Motivate youranswer by stating which level favours the United States and France.Production Advantage and Opportunity CostsAssume there are two countries, the United States and France, and two goods, automobiles andcomputers.The table presented below shows the number of automobiles and computers that the United States andFrance can produce with the same amount of resources.United States FranceAutomobiles 120 100Computers 60 55Source: Pearson Education Inc. 1.1 Which country has an absolute advantage in computer production? Motivate your answer.1.2 Which country has a comparative advantage in the production of automobiles? Motivateyour answer. 1.3 Assume these countries trade with one another under the conditions of free trade. Whichcountry will specialise in the production of automobiles? Motivate your answer. 1.4 If free trade exists between the United States and France, what are the highest and lowestlevels for the price of an automobile (expressed in terms of computers)? Motivate youranswer by stating which level favours the United States and France.
- Elif can produce 6 pies or 30 cakes in 1 hour. Ahmet can produce 10 pies or 20 cakes in 1hour A) What is the opportunity cost of producing cakes for Elif? What is the opportunitycost of producing cakes for Ahmet?B) Who has a comparative advantage in producing pies and who has a comparativeadvantage in producing cakes?C) On the PPF lines, show what Elif produces and what Ahmet produces when theyspecialize.D) Suppose that they set the exchange price as 1 Pie = 3 Cakes. If they specialize andtrade, show an exchange situation that is beneficial for both (compared to thesituation you found at part (b))?F) What is the minimum and maximum exchange price they could have determined foran exchange that will be beneficial for both of them?What is the opportunity cost of increasing missle production fromm 50 to 100?R Imagine that it costs $40 in the United States to produce one ton of soybeans and transport them to market, while it costs $30 in Brazil to produce one ton of soybeans and transport them to market Imagine that it costs $20,000 in the United States to produce one automobile and transport it to maket, while costs $10,000 in Brazil to produce one automobile and transport it to market. Which of the following four arrangements would be most efficient? (Hint: Derived OC from PPF (production) = 1/OC derived from costs to make ) a. The United States should produce everything, since it can produce both soybeans and automobiles better than Brazil can produce them. Ob. Brazil should specialize and produce only automobiles. The United States should specialize and produce only soybeans. Then the two countries should trade with each other. Brazil will send automobiles to the United States, while the United States sends soybeans to the Brazil. Oc. The United States should specialize and produce…
- Comparative and absolute advantage Antonio and Caroline are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of alfalfa and barley each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing alfalfa or barley or to produce alfalfa on some of the land and barley on the rest. Alfalfa Barley (Bushels per acre) (Bushels per acre) Antonio 40 8 Caroline 28 7 On the following graph, use the blue line (circle symbol) to plot Antonio's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Caroline's PPF. Antonio's PPFCaroline's PPF01002003004005006007008009001000200180160140120100806040200BARLEY (Bushels)ALFALFA (Bushels) _______ has an absolute advantage in the production of alfalfa, and ______ has an absolute advantage in the production of barley. Antonio's opportunity cost of producing 1 bushel of barley is…1. The countries France and Italy produce Perfumes and Leather Coats using only labor as an input. AvailableLabor for France and Italy is 3000 and 1000 respectively. Unit of labor per Leather Coat in France is 6 units and inItaly are 2 units. France needs 2 units of labors to produce 1 bottle of Perfume and Italy needs 4 unit of labor. a) Draw the Production Possibility Curve by using relevant information. b) Which country has the comparative advantage in producing Perfume?An economy produces two goods ,X and Y .lt uses two means of production, labour and capital. A unit of labour can produce either 1unit of X or 4units of Y (or linear combination of the two).A unit of capital can produce either 4units of X or 1unit of Y (or linear combination of the two)there are 100units of each means of production. (i) Draw the production possibility frontier of the economy when the two goods can only be produced by a mixture of both factors. (ii)What will be the opportunity cost of X if the economy produces 50units of X ? (iii) Given that the production technology is linear ,will the opportunity cost of X remain unchanged when we produce 90units of X ? (iv)Briefly explain the difference between the PPC with a constant opportunity cost and the PPC with an increasing opportunity cost as more output of one good is produced. Use a well labeled diagram to explain your answer?
- The table shows the output of bikes and skateboards for Luke and Han (the end points of their respective PPCs). They can produce either or some linear combination of both Bikes (B) and Skateboards (S). With this information, select the choice that is a true statement. a b Question 9 C Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. d 1/11 answered ii Luke has the comparative advantage in producing Bikes and Skateboards. Han has the comparative advantage in producing Bikes and Skateboards. Luke Han Question 10 Answers ar Bikes 50 40 Skateboard Luke has the comparative advantage in Bikes and Han has the comparative advantage in producing Skateboards. Luke has the comparative advantage in Skateboards and Han has the comparative advantage in producing Bikes. 70 64Suppose there are two countries Peru and Japan that produces 7,523 units ofFood or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5,000. d) Which country has the comparative advantage in food? In fuel? Explain. e) Which good(s) should each country specialized in?Table 3-23 Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate. Labor Hours Needed to Make 1 Pound of Pounds Produced in 24 Hours Pork Tomatoes Pork Tomatoes Farmer 16 3 14 18 Rancher 14 16 16 Refer to Table 3-23. Assume that the farmer and the rancher each has 24 labor hours available. If each person spends all his time producing the good in which he has a comparative advantage, then total production is a. 4 pounds of pork and 6 pounds of tomatoes. b. 6 pounds of pork and 8 pounds of tomatoes. c. 4 pounds of pork and 8 pounds of tomatoes. d. 6 pounds of pork and 6 pounds of tomatoes.