1. Determine which country has a comparative advantage in each good. Suppose that Country A and Country B have unit labour requirements for producingone tonne of steel and one tonne of oil shown in the following table:SteelOilUnit labour requirementsCountry A42Country B45

Comparative advantage: Let's say there are two countries A and B, each producing two goods X and Y…

Answered: Suppose that Country A and Country B…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter25: The Supply Of And Demand For Productive Resources

Section: Chapter Questions

Problem 9CQ

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1. Determine which country has a comparative advantage in each good.

Suppose that Country A and Country B have unit labour requirements for producing
one tonne of steel and one tonne of oil shown in the following table:
Steel
Oil
Unit labour requirements
Country A
4
2
Country B
4
5

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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