Homework Answers
Country x is producing 30 units of coffee and 20 units of wheat.
Opportunity cost of producing coffee in terms of wheat in country x = (20 / 30) = 0.67 units of wheat.
Opportunity cost of producing wheat in terms of coffee in country x = (30 / 20) = 1.5 units of coffee.
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Country y is producing 20 units of coffee and 5 uints of wheat.
Opportunity cost of producing coffee in terms of wheat in country y = (5 / 20) = 0.25 units of wheat.
Opportunity cost of producing wheat in terms of coffee in country y = (20 / 5) = 4 units of coffee.
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Opportunity cost of producing wheat in country x is lower than the opportunity cost of producing wheat in country y. It means country x has a comparative advantage in the production of wheat and produce only wheat.
In similar fashion, country y has a comparative advantage in the production of coffee and should produce only coffee.
Therefore, country x should produce wheat and country y should trade for wheat.
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Problem Set 1A/1: Trade Do this problem set if your surmame (family name) begine R-Z Name: The small nations of Arboc and Arbez can produce two goods, wheat and coffee. The maximum quantity of each good is shown by the production possibility information below. Assume the two nations trade in a world containing many small nations. Costs are constant within each country. Arboc Arbez wheat 50 0 wheat 30 0 0 0 90 an and and and 100...
I would gladly appreciate if i could get some help.
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Please help me to figure it out, thanks
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