Suppose there are 1 million workers in Country X. Each worker can either produce 2 units of game console or 30 units of wheat in a year. b.) Suppose, for Country Y, the opportunity cost of producing a unit of game console is 25 units of wheat. i. Which country, X or Y, has a comparative advantage in producing game console? Explain. ii. Suppose in the international trade market, one unit of game console can be exchanged for 22 units of wheat. Explain whether Country X should buy or sell game console in the international market. What will be her gain from trade per unit of game console bought or sold? What will be the corresponding gain from trade for Country Y?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
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Chapter1: Making Economics Decisions
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Suppose there are 1 million workers in Country X. Each worker can either produce 2 units of game console or 30 units of wheat in a year.

b.) Suppose, for Country Y, the opportunity cost of producing a unit of game console is 25 units of wheat.

i. Which country, X or Y, has a comparative advantage in producing game console? Explain.
ii. Suppose in the international trade market, one unit of game console can be exchanged for 22 units of wheat. Explain whether Country X should buy or sell game console in the international market. What will be her gain from trade per unit of game console bought or sold? What will be the corresponding gain from trade for Country Y? (4 marks)

 

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