26 of 100 The table in Figure 2 shows the amounts of potatoes and beets that Robert and Clarence can produce. The opportunity cost of one tone of potatoes for Clarence is Figure 2 Calculate Opportunity Costs Robert and Clarence, Production Table, Potatoes and Beets Potatoes (tons/year Beets (tons/year) Robert Clarence 12 16 6 tons of beets 4 tons of beets 2 tons of beets 1/4 of a ton of beets 6 4

26 of 100 The table in Figure 2 shows the amounts of potatoes and beets that Robert and Clarence can produce. The opportunity cost of one tone of potatoes for Clarence is Figure 2 Calculate Opportunity Costs Robert and Clarence, Production Table, Potatoes and Beets Potatoes (tons/year Beets (tons/year) Robert Clarence 12 16 6 tons of beets 4 tons of beets 2 tons of beets 1/4 of a ton of beets 6 4

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter7: Economic Growth: Theory And Policy

Section: Chapter Questions

Problem 4TY

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scenario Production Advantage and Opportunity CostsAssume there are two countries, the United States and France, and two goods, automobiles andcomputers.The table presented below shows the number of automobiles and computers that the United States andFrance can produce with the same amount of resources.United States FranceAutomobiles 120 100Computers 60 55Source: Pearson Education Inc. 1.1 Which country has an absolute advantage in computer production? Motivate your answer.1.2 Which country has a comparative advantage in the production of automobiles? Motivateyour answer. 1.3 Assume these countries trade with one another under the conditions of free trade. Whichcountry will specialise in the production of automobiles? Motivate your answer. 1.4 If free trade exists between the United States and France, what are the highest and lowestlevels for the price of an automobile (expressed in terms of computers)? Motivate youranswer by stating which level favours the United States and France.
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A worker in country A can produce either 5 computers or 45 tons of rice, while a worker in country B canproduce either 7 computers or 42 tons of rice. a. Graph the production possibilities curve for each country. On which point of the curve would eachcountry produce if the workers spent half of their time producing each good? b. Which country has absolute advantage? Which country has comparative advantage? In theproduction of rise Country A absolute advantage c. If there was trade, which country would specialize in the production of rice? d. At what price of computers would the countries agree to trade?
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