Explore BrainMass
Share

Explore BrainMass

    Two cases of comparative/absolute advantage

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    1. (Absolute and Comparative Advantage) You have the following information concerning the production of wheat and cloth in the United States and the United Kingdom:
    Labor Hours Required to Produce One Unit
    United Kingdom United States
    Wheat 2 1
    Cloth 6 5

    a. What is the opportunity of producing a unit of wheat in the United Kingdom? In the United States?
    b. Which country has an absolute advantage in producing wheat? In producing cloth?
    c. Which country has a comparative advantage in producing wheat? In producing cloth?
    d. Which country should specialize in producing wheat? In producing cloth?

    2. (Shape of the PPF) Suppose a production possibilities frontier includes the following combinations:

    Cars Washing Machines
    0 1,000
    100 600
    200 0

    a. Graph the PPF, assuming that it has no curved segments
    b. What is the cost of producing an additional car when 50 cars are being produced?
    c. What is the cost of producing an additional car when 150 cars are being produced?
    d. What is the cost of producing an additional washing machine when 50 cars are being produced?
    When 150 cars are being produced?
    e. What do your answers tell you about opportunity costs?

    © BrainMass Inc. brainmass.com April 3, 2020, 7:00 pm ad1c9bdddf
    https://brainmass.com/economics/comparative-advantage/two-cases-of-comparative-absolute-advantage-239314

    Attachments

    Solution Summary

    The answers answer the questions below in regards to optimum trade given different advantages in production. The second case provides an interesting PPF.

    $2.19

    ADVERTISEMENT