Question

Opp Cost and Comp Advantage Here are some hypothetical nunters used to austrate the ideas or trade oms specimaton and compara ve advantage Assume Sn Lanka, usn a·her resources emo nity can produce ether 1,000 bags of rice OR 3,000 bags of tea Lets aso assume that, using altl her resources that the countries have similar resource endowments and that, initially, they are not trading with each other. Therefore, each of the countries has to produce both rice and tea for its citizens Suppose that in the no trade situation, Sri Lanka was consuming 400 bags of nice and 1,800 bags of tea, and in the no-trade situation, Kenya was consuming 500 bags of rice and 500 bags of Kenya can produce either 1,000 bags of rice OR 1,000 bags of tea Further, assume tea Opp Cost and Comp Advantage Now, let's plary a fun game called the "Trading Game" to tigure out whether there is any beneht (in termes of increased consumpbion possibilities) for these two counties if they trade with each other You are given the tollowing information to start the "Trading Game" The trading price is set at one bag of rice for two bags of tea, and Kenya wishes to keep at least 550 bags of rice aner trade Apply your knowledge of opportunity cost to identity the comparative advantage enjoyed by each country. Now using your knowledge of specialization and trade, show in a muiti-paragraph essay, that the two countries can benefit by consuming more of both goods after trade

Answer 1

oduad ice, 3 bags cedl produte 1 b l boo Hana tha ms-ginal Cost to produco 1 b Neelgagon

300o cadibe ● the marginale cost Since iral cost to produce tea implies Srilanka has comhasra h m próduchion peialie in produchon eo Neelgagan

Date Kenya maxginal Cost to procuce uci Ja』 mott Le ice But Since, Sailanka has linden to ada

No. Date Sxi lanka onsmes 400 bagg 500 ke Aftes Trade pec m tea psodu hon it uil to produce 3ooo b nal roduce rate is giuen 2 bag tea l bag i sei c 0,bag

No. Date A remaining 450 uice to. Sylan ba an ех.rha get,g0o bags dst Hea I bag.ou ce=-Q bagheb 2150 bag puce-300 byta: after ade mhen gvics and goo e a 500 bags Pice end seo b tea Kora able to- Nelgagas

No. Date Lox Si-lanka guce Υ.lz e 3000-go 9100 bag ct Hea consum 450 ha9a.아

No. Date Unda No sade Sri Lamka's 4do b ea

Hona unde trading mosuo·quantities both oods