Question

Question 4 O out of 10 points Consider the following table. Country A Country B Bananas Apples Numbers denote hours to produce 1 unit The world per unit gains of specializing according to Comparative advantage are.. 10 In order to answer, ask yourself: (1) Who the comparative advantage at what? (2) If Country A and B specialize according to comparative advantage, who gives up the production of bananas? who gives up the production of Apples? (3) How many units of bananas are gained by the Country specializing in bananas, any time this Country gives up 1 apple? (4) How many units of apples are gained by the Country specializing in apples, any time this Country gives up 1 banana? (5) Finally: the world is composed by Country A and Country B together. To find the world's per-unit gain, sum up gains and what we give up for both Country A and Country B, for both bananas and apples. Selected Answer 2 apples 2 bananas 1 apple; 1 banana 2 apples; 2 bananas 1 apple; 2 bananas 2 apples; 1 banana Answers:

Answer 1

for question no. 1. The answer will be B will produce Banana due to greater comparative advantage( lower opportunity cost) of production and A will produce apple due to comparative advantage in the production of Apple.

2. According to comparative advantage A will give up the production of Banana and B will give production of Apple.

3. Country B gains 2 Bananas by giving up 1 unit of Apple.

4. Country A gains 2 Apples by giving up 1 unit of Banana.

5. The net gain to the world is 2 units of banana and 2 unots of apple by giving up 1 unit of apple and banana each.