Answered: USA Wheat Lumber =0, Wheat = 900 Lumber…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hello please provide homeowrk help with the following usung the image provided. Thank you.

1. What is the opportunity cost of one more unit of Lumber in Country B and who has the comparative advantage in Wheat production?

2. What country has the comparative advantage in Lumber production?

3. What is the acceptable term of trade for which both countries will gain from trade?

USA
Wheat
Lumber =0, Wheat = 900
Lumber
Guyana
Lumber = 0, Wheat = 1000
Lumber 300, Wheat = 0
Lumber =200, Wheat = 0

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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