1. Suppose two nations, Beta and Gamma, each make aircraft and corn. The main resource in each nation is hours of"labor". Production occurs in each nation according to the following table. With one hour, a worker in each nation canproduce the following:Table showing Aircraft and Corn producedper hourAircraftCorn500 рerBeta1 per hourhour300 рerGamma2 per hourhourWhat is the opportunity cost of each good (in terms of the other good) for each nation? Try creating a small table of theopportunity costs such as this:Beta:1 aircraft =corn1 corn =aircraft%3DGamma: 1 aircraftcorn1 corn =aircraft%3DWhich nation has the Absolute Advantage in aircraft? Which nation has the Absolute Advantage in corn?Which nation has the Comparative Advantage in aircraft? Which nation has the Comparative Advantage in corn?If these two nations trade, what good should each specialize in and export to the other?What would be the range for the terms of trade (price of aircraft in terms of corn, for example) that would make both ofthese nations benefit economically from trade?

The cost that depicts the value of the next best alternative when a certain decision is being made…

Answered: 1. Suppose two nations, Beta and Gamma,…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains Rrom Trade

Section3.2: Comparative Advantage: The Driving Force Of Specialization

Problem 2QQ

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1. Suppose two nations, Beta and Gamma, each make aircraft and corn. The main resource in each nation is hours of
"labor". Production occurs in each nation according to the following table. With one hour, a worker in each nation can
produce the following:
Table showing Aircraft and Corn produced
per hour
Aircraft
Corn
500 рer
Beta
1 per hour
hour
300 рer
Gamma
2 per hour
hour
What is the opportunity cost of each good (in terms of the other good) for each nation? Try creating a small table of the
opportunity costs such as this:
Beta:
1 aircraft =
corn
1 corn =
aircraft
%3D
Gamma: 1 aircraft
corn
1 corn =
aircraft
%3D
Which nation has the Absolute Advantage in aircraft? Which nation has the Absolute Advantage in corn?
Which nation has the Comparative Advantage in aircraft? Which nation has the Comparative Advantage in corn?
If these two nations trade, what good should each specialize in and export to the other?
What would be the range for the terms of trade (price of aircraft in terms of corn, for example) that would make both of
these nations benefit economically from trade?

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Suppose two nations, Beta and Gamma, each make aircraft and corn. The main resource in each nation is hours of "labor". Production occurs in each nation according to the following table. With one hour, a worker in each nation can produce the following:

Table showing Aircraft and Corn produced per hour

	Aircraft	Corn
Beta	1 per hour	500 per hour
Gamma	2 per hour	300 per hour

What is the opportunity cost of each good (in terms of the other good) for each nation? Try creating a small table of the opportunity costs such as this:

Beta: 1 aircraft = _______ corn 1 corn = _______ aircraft

Gamma: 1 aircraft = _______ corn 1 corn = _______ aircraft

Which nation has the Absolute Advantage in aircraft? Which nation has the Absolute Advantage in corn?

Which nation has the Comparative Advantage in aircraft? Which nation has the Comparative Advantage in corn?

If these two nations trade, what good should each specialize in and export to the other?

What would be the range for the terms of trade (price of aircraft in terms of corn, for example) that would make both of these nations benefit economically from trade?

Suppose two roommates, Sam and Terry, agree that they should clean the apartment each week. It takes Sam one hour to vacuum, and one hour to clean the bathroom. It would take Terry 90 minutes to vacuum and 2 hours to clean the bathroom.

Does Terry have a Comparative Advantage in one of these activities? Is it possible that if the roommates each do only one of the tasks every week they would have more combined free time than if they alternated weeks of vacuuming and bathroom cleaning?

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