Question 1: Consider two countries - A and B. Both countries can produce two types of goods - oil and cloth. In the figure below, we are given the PPF of both countries. Determine the pattern of trade under absolute advantage and comparative advantage theory. table[[:]]

Question 1: Consider two countries - A and B. Both countries can produce two types of goods - oil and cloth. In the figure below, we are given the PPF of both countries. Determine the pattern of trade under absolute advantage and comparative advantage theory. table[[:]]

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter18: Trading With Other Nations

Section: Chapter Questions

Problem 10AA

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

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Question 1: Consider two countries - A and B. Both countries can
produce two types of goods - oil and cloth. In the figure below, we
are given the PPF of both countries. Determine the pattern of trade
under absolute advantage and comparative advantage theory.\
table[[ ]]

Cloth(in yards)
250
200
150
100
50
0
0
A
400
200
Oil (in barrels)
600
Cloth(in Yards)
120
100
80
60
40
20
0
0
100
B
200
300
Oil(in barrels)
400

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