Question

PLEASE COMPLETE THE FOLLOWING

COMPARATIVE ADVANTAGE Resources to produce 1 T of product Onions Garlic 5 10 15 Trinidad Guyana 40 ASSUMPTION: Suppose that each country has 100 units of resources 1. Who has the absolute advantage in onions and garlic if each country devotes half of it's resources to producing each product.? 2. What is the total output without world trade for each product? 3. Who has the opportunity cost in producing garlic? 4. Determine what goods should each country specialize in on the basis of their comparative advantage. Support with a table. 5. What is total world output if a country engages in international trade? Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall 6.48

Answer 1

1)

Onios Cradlie Trinidad raying no rasouno unit resource requirement ar Onious.. 20 / requirement for harle 10 Trinidad 7 6.66 T heyang / 2.5 Butput with loo units of resonny

As Trinidad can produce more onion with same number of resources,so it has absolute advantage in onions.

B)In absence of world trade each country uses half resources for onions and half for garlic.

So onions production by Trinidad=10

Garlic production by Trinidad=5

Onions production by Guyana=1.25

Garlic production by Guyana=3.33

Total production of onions=10+1.25=11.25

Total production of garlic=5+3.33=8.33

C) opportunity cost of producing garlic in Trinidad=20/10=2

Opportunity cost of producing garlic in Guyana=2.5/6.66=0.375

So Guyana has the lower opportunity cost of producing garlic.

D)
fasouno resource requirement for unit. Onious / horle 1 oooc Toc I 2 0 10 10/20=0.5 20/10=2 2.5 / 6.66 16.6619.5 = 266 2.5 20.375 امامية 6 Trinidad Gelang output with loo units of resonny and opportunity cost

fasouno resource requirement for unit. Onious / horle 1 oooc Toc I 2 0 10 10/20=0.5 20/10=2 2.5 / 6.66 16.6619.5 = 266 2.5 20.375 امامية 6 Trinidad Gelang output with loo units of resonny and opportunity cost
so opportunity cost of producing onions is lower in Trinidad ,so Trinidad has comparitive advantage in production of onions.

Opportunity cost of producing garlic is lower in Guyana,so Guyana has comparitive advantage in production of garlic

So Trinidad should specialize in onions and Guyana in garlic.

5) In international trade ,each country specialize in their respective comparative advantage goods and produce that good only.

So Trinidad will only produce onions and Guyana will only produce garlic.

Trinidad production of onions=20

Guyana production of garlic=6.66

Total onions output=20

Total garlic output=6.66