Question

1. The following represents the output of seafood and textiles in both Ecuador and Panama: Seafood Textiles Ecuador 50 pounds 20 yards Panama 30 pounds 40 yards a. Calculate the opportunity cost of each good in each nation and indicate who has the comparative advantage. b. If each nation has 100 units of resources to devote to these 2 goods, and uses 50 units for each, what is world output of the two goods? c. Demonstrate that world output rises under specialization. Part II - Suppose instead that the numbers above appeared as: Seafood Textiles Ecuador 20 pounds 30 yards Panama 10 pounds 20 yards a. Who has an absolute advantage in each good now? b. Who has the comparative advantage?

Answer 1

In this question, we need to find which country is enjoying a comparative advantage in the production of the respective good. For this we find the opportunity cost of production of a good in terms of the other good. The country with the lowest opportunity cost is having comparative advantage in the production of a given good.

In part -II, the country enjoying the absolute advantage and  comparative advantage is identified.

Elartions As per the theory of contpar stive odvarstage į two countries are producing the gools, trade between the coastries can help both of them if the busty which in comparatively effaust in the production of one good, specializes fully in it production, and the other bustry completely specializes in the production of the ther good. The coustry which produces a good with a relatively lower opp. Awsity but is hairg a comperative advastage in its production than the other busty stag 2 counting, Scuador and Panama an producing Seafood (s) and Textiles (T): - ' Seafood Textile Euador | 50 pounds , 20 pods Paname | 30 pounds | 40 gaids. When 50 pounds of seafood are produced in Smedor, to payerds of textiles are produced, Opportunity cost of producing I additional with Sofod in laadal a to win of textiles. cs lung accord produced by Serning 452 Ol et textiles

likes to pounds of stafood are produed in porma, 40 yards & textiles are podned. opportunity Golg producing 1 more additional cinit & Seaford = 40 =4 = 133 loita . 3 3 Toxhlen. Thus, Scofood is produced at a relatively lover opportunity est in Scoador. Therefore, Suodor should specially in Refood. Conside the case of Textiles, When 20 gards of textiles are produced is made, 50 pounds of seafood at produced .. opporturity Gol of poducing 1 more wit & textile in Smedor = 50 = 5-25 wind Is Poreme, 40 yards of textiles produced along with 30 pounds of recfood. Opportunity bol of prodning I more unil of textile in Prome = 30 -0.75 wachef tatoort, 40 Thus, seet textile in produced et a reletely lower opportunity ist in Panome, Thus, Paneme should sprachze in the prodentin Searned with Tilanner

agudo Support the total amanda resumes arildie is losurite a bold fyeah good, Tokat outpd poduction broase trade - L S horch T Tortiles Zuecdov , 5x = 2500 2015-100 - pando Perome 30x50=1500 | 40152 esguide I er trede. I Salood nodol 50x100 = 5000 - predo والمسرم pondo 40x100=400 Ponome I Goods (5) Birce awodor infully spreadizing on Psefood productor, it con ux all dik vessures of l usth of seafood production, Pumilally, Perome was all los unha ressones to textile prodention. Restord production would output] Prefer to de: 952311500 = 40 pounds Kresterddeith 5000+ - peerds. CamScanner

- Targovis Chair for treate Nohle portanto [old adp 1) future - 108720 * 3 cedo All trade in attor 4000 pola borror in wond alpel of textiles 1. 10o gards [aans toro treche] PRAT Seolood and Textile production in Eudor ard Scofood Catilan Amador 1 20 prenda 30 gids I Ponome 1 10 ponds , 20.gads Here, when Emedor is podning do ponds of Seafood, Panome in producing only lo pounds. When Zmedor in producing 30 gods of textiles, Paneme in producng only 20 cards. Thus, in bith seafood and textile production nody oth houng an absolute odveto one olmanner

When Zmadhor produus 2 0 pounds of seafood, it can produce orly 3 0 yards of textiles hus opportunity Gl g producing I more unitq & fod = 30 = 3 = 1.5 ustig textiles Lakes panome produces lo pound of seafood, it con produce osy 20 yerda og textiles hus opportunity aty producing Imore wild scalood = 20 = 2 unha textiles I stere, we see that, &meodor is heung a seletely lowa opportunity but for prodention of erfood. Thus, it a brporatinly effinest on Smedor esjoys omparatire odvestage in the scofood production are panime. Who amador produces 30 yerdoof lextles, Il produces 20 pounds of Seafood Thus, opportunity Lost of producing textile = 20 - 22 . = 0.67 units of greatest Similarly, for Paname, opportunity cost of prodning textile = 102 1 0.5 i units of Retard the Siasa Porome is heurgelowe opportunity starcsmpared to Emades textile production,

it should be cojoging ă compare the odvestage over Swadon is production of toxtles. my though amador in houna absolute advostap in the productions of the Seafood and textiles, according to the theory of comporetice advestage, atrodo con happen between than 2 w ustvics is such a way that both custria will gain if esfood Emedor specializes in and Paneme in textiles. Scanned with CamScanner