Answered: Ahmed the Nigerian guy can produce any…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Ahmed the Nigerian guy can produce any of the following combinations of clay pots (P) and jute bags (J):

(a) 100 P and 0 J; (b) 50 P and 25 J; (c) 0 P and 50 J.

Adib the Bangladeshi guy on the other hand can produce the following combinations of clay pots and jute bags:

(a) 50 P and 0 J; (b) 25 P and 40 J; (c) 0 P and 80 J.

Who has the comparative advantage in the production of clay pots? Of jute? Explain and show the calculations clearly.

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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