Homework Answers
Estonia's opportunity cost of producing swords= 2/5 = 0.4
Morocco's opportunity cost of producing swords= 3/3= 1
Thus Estonia has a comparative advantage in swords and Morocco has a comparative advantage in belts.
The terms of trade should be in between 0.4 and 1
Only 1/4 of a belt for a sword is outside the range.
Correct option - A
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Output per hour of Production and Consumption without Trade Swords Belts Production with Trade Swords Belts...
Table 7-6 Output per hour Production and &n
Table 7-6 Output per hour Production and Production of work Consumption without Trade with Trade Swords Belts Swords Belts Swords Belts Estonia 5 3 100 40 200 0 Morocco 2 2 60 60 0 120 Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade,...
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