Production Advantage and Opportunity CostsAssume there are two countries, the United States and France, and two goods, automobiles and computers.The table presented below shows the number of automobiles and computers that the United States and France can produce with the same amount of resources. United StatesFranceAutomobiles 120100Computers 6055Source: Pearson Education Inc. 1.1 Which country has an absolute advantage in computer production? Motivate your answer.Which country has a comparative advantage in the production of automobiles? Motivate your answer. Assume these countries trade with one another under the conditions of free trade. Which country will specialise in the production of automobiles? Motivate your answer. If free trade exists between the United States and France, what are the highest and lowest levels for the price of an automobile (expressed in terms of computers)? Motivate your answer by stating which level favours the United States and France.

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Production Advantage and Opportunity Costs

Assume there are two countries, the United States and France, and two goods, automobiles and computers.

The table presented below shows the number of automobiles and computers that the United States and France can produce with the same amount of resources.

	United States	France
Automobiles	120	100
Computers	60	55

Source: Pearson Education Inc.

1.1 Which country has an absolute advantage in computer production? Motivate your answer.

- Which country has a comparative advantage in the production of automobiles? Motivate your answer.
Assume these countries trade with one another under the conditions of free trade. Which country will specialise in the production of automobiles? Motivate your answer.

If free trade exists between the United States and France, what are the highest and lowest levels for the price of an automobile (expressed in terms of computers)? Motivate your answer by stating which level favours the United States and France.

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