Question

100 Chairs 30 Chairs 30 Clay pots 100 Clay pots

1)   Calculate the opportunity costs of production for each county

County D gives up ___ chairs(s) for each clay pot produced

                County D gives up _____ clay pot(s) for each chair produced

County H gives up ___ chairs(s) for each clay pot produced

                County H gives up _____ clay pot(s) for each chair produced

2)

Define the concept of absolute advantage:

Define the concept of Comparative advantage

3) Fill in the blanks to show how each country above is better off if each specializes on production of a particular good and than trades with the other.

Country ____ should specialize in the production of ________.   County _____ should specialize in the production of ______.   Therefore with specialization country D will produce ____ chairs and ____ clay pots and County H will produce _____ chairs and ____ clay pots.

Assume each country wants to keep half of what they produce and trade the rest.

Terms of trade 1 chair = 1 clay pot.

Therefore after trade Country D will have _____ chairs and _____ clay pots.   County H will have ____ chairs and ____ clay pots.  

Answer 1

0 county county gives up 3.33 chairs for each pot prod County goes up 0.30 claypots for hair each chair prod produced Consys gives up 0.30 chans for each day plot produced and chryn gwerup 3.33 claypots for each chair produced. 2 Absolut advantge - A county has an absolut advantage in a good in which it ho is now eller Comparatius Adwakage Aconty has A if it canproduce a goos is with lower opp cost. Contry I should specialize in chairs Contry it should specialize in Clay pots Therefore cty D wies produce loo chavis 4 oclaypal A comby n will produce o chairs & 100 day pots Contry will have so chais 4 soclay pets Contz H will also have so chairs & so clay pots