Question

8. Consider the PPFs in the illustration below: 70 60 50 40 Country Y COMPUTERS COMPUTERS 30 Country X 20 10 0 0 1 2 3 4 7 8 9 10 11 5 6 FOOD a. Which country enjoys absolute advantage? b. Country enjoys comparative advantage in the production of Food and Country enjoys comparative advantage in the production of Computers. c. Following the Heckscher Ohlin theorem, Country should specialize in the production of Food and Country in the production of Computers. d. Hence, Country X would show a surplus in the trade of and Country Y would show a deficit in the trade of

Answer 1

9 Зо 9 10 60 Quyi food computer 0 country y enjoys absolute advantage © As for country 9 30c a - for country, 10 3 1 of 60c E = 6c So country X p has comparative advantage in food and Weative advantage in computers has comp- country 7 the 1

computers cud export ood 3 According to Ho theo theory country 9 an comentary X should take foo 9 Hence, the country with comparative advantage in any particut at Good will surplux Trade) Good. Country X trade of POOD and country ? has trade suplus in computers ) that $ has surplus in