Question

You have to answer the questions that I have typed out, the screenshots are just the data (disregard the questions on the screenshot/worksheet)
Answer questions 1-9 on the basis of the following PPF. Production of Cheese and Bread for England and Spain are shown in the following table. Cheese 40 10 Bread 10 England Spain 1. Does either country have an absolute advantage? 2. Which country has the comparative advantage in bread?

Question 1 (10 points)

Refer to HW #7. Does either country have an absolute advantage in the production of the two goods?

Question 1 options:

	Spain has an absolute advantage in the production of both goods.
	England has an absolute advantage in the production of cheese and Spain has an absolute advantage in the production of bread.
	England has an absolute advantage in the production of both goods.
	Spain has an absolute advantage in the production of cheese and England has an absolute advantage in the production of bread

Question 2 (10 points)

Refer to HW #7. Which country has a comparative advantage in bread?

Question 2 options:

	Both countries have a comparative advantage in bread production.
	Spain has a comparative advantage in bread.
	England has a comparative advantage in bread.
	Neither country has a comparative advantage in bread production.

Question 3 (10 points)

Refer to HW #7. Which country has a comparative advantage in cheese?

Question 3 options:

	Both countries have a comparative advantage in cheese.
	Spain
	England
	Neither country has a comparative advantage in cheese.

Question 4 (10 points)

Refer to HW #7. If each country agrees to specialize in the good for which it has a comparative advantage, how much will England produce?

Question 4 options:

	A) 10 pounds of cheese and 32 loaves of bread
	B) 32 pounds of cheese and 2 loaves of bread
	C) 40 pounds of cheese and 0 loaves of bread
	D) 0 pounds of cheese and 10 loaves of bread

Question 5 (10 points)

Refer to HW #7. If each country agress to specialize in the good for which it has a comparative advantage, how much will Spain produce?

Question 5 options:

	A) 0 loaves of bread and 10 pounds of cheese
	B) 5 loaves of bread and 0 pounds of cheese
	C) 6 pounds of cheese and 5 loaves of bread.
	D) 2 loaves of bread and 10 pounds of cheese

Question 6 (10 points)

Refer to HW7. How much bread does England consume after the trade?

Question 6 options:

	4 loaves of bread.
	0 bread
	2 loaves of bread
	3 loaves of bread

Question 7 (10 points)

Refer to HW 7. How much cheese does England consumer after trade?

Question 7 options:

	34 pounds of cheese
	26 pounds of cheese
	6 pounds of cheese
	12 pounds of cheese.

Question 8 (10 points)

Refer to HW7. How much bread does Spain consume after trade?

Question 8 options:

	4 loaves of bread.
	0 bread
	3 loaves of bread.
	2 loaves of bread

Question 9 (10 points)

Refer to HW 7. How much cheese does Spain consume after trade?

Question 9 options:

	6 pounds of cheese
	34 pounds of cheese
	26 pounds of cheese
	12 pounds of cheese

Question 10 (10 points)

Refer to HW7. Relative to the case of No Trade, is Spain better off after trade?

Question 10 options:

	Yes, because Spain consumes the same amount of cheese but more bread.
	Yes, because Spain consumes the same amount of bread but more cheese.
	Yes, because Spain consumes more of both goods.
	No, because Spain consumes less of both goods.

Question 11 (10 points)

Refer to HW 7. Relative to the case of No Trade, is England better off after trade?

Question 11 options:

	Yes, England consumes the same amount of bread but more cheese.
	Yes, England consumes the same amount of cheese but more bread.
	Yes, England consumes more of both goods.
	No, England consumes less of both goods.

Answer 1

1. Absolute Advantage:

Absolute advantage is the ability of a country to produce a good or service at a lower per unit cost as compared to any other country that produces same good or service.

England has an absolute advantage in the production of both goods. This is because England is able to produce more of both goods as compared to Spain.

2. Comparative Advantage

A country has a comparative advantage in producing that good if the opportunity cost of producing that good is lower in that country as compared to another country.

England:

10 units of bread = 40 units of Cheese

1 unit of bread = 40/10 = 4 units of Cheese

Opportunity cost of 1 unit of bread is 4 units of Cheese.

Spain:

5 units of bread = 10 units of Cheese

1 unit of bread = 10/5 = 2 units of Cheese

Opportunity cost of 1 unit of bread is 2 units of Cheese.

Spain has lower opportunity cost in the production of bread. So, Spain has comparative advantage in the production of bread.

Answer is; Spain has a comparative advantage in bread.

3.

England:

40 units of Cheese = 10 units of bread

1 unit of Cheese = 10/40 = 1/4 = 0.25 unit of bread

Opportunity cost of 1 unit of Cheese is 0.25 unit of bread.

Spain:

10 units of Cheese = 5 units of bread

1 unit of Cheese = 5/10 = 0.5 unit of bread

Opportunity cost of 1 unit of Cheese is 0.5 units of bread.

England has lower opportunity cost in the production of Cheese. So, England has comparative advantage in the production of cheese.

Answer is; England

4. England is specialized in production of Cheese. So, England will produce only cheese.

40 units of Cheese and 0 unit of Bread.

Answer is; C) 40 pounds of cheese and 0 loaves of bread

5. Spain is specialized in the production of bread. So, it will produce only bread.

0 units of cheese and 5 units of bread

Answer is; B) 5 loaves of bread and 0 pounds of cheese