International Trade and Comparative Advantage
Not what you're looking for?
Assume the following output and labor hours for Russia and Germany in producing Wheat and Cloths
Russia Wheat 3 Cloths 6 Labor Hours 100
Germany Wheat 2 Cloths 2 Labor Hours 50
a. Which country has the comparative advantage in wheat?
b. Which country has the comparative advantage in cloth?
c. Which country has the absolute advantage in wheat?
d. Which country has the absolute advantage in cloth?
e. Which good will Russia specialize in?
f. Which good will Germany specialize in?
g. Give the most obvious terms of trade.
Purchase this Solution
Solution Summary
Determination of the absolute and comparative advantage based on labor hours in two countries.
Solution Preview
A country has an absolute advantage economically over another, in a particular good, when it can produce that good more efficiently than the other. In this case efficiency will be judged by labor hours.
We can calculate the efficiency of production by dividing the amount of the good produced by how many hours it took to produce it.
Russia: Wheat 3/100 Cloths 6 /100
Germany: Wheat 2/50=4/100 Cloths 2/50 =4/100
Since Germany can produce four grain per 100 hours, but Russian ...
Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.