Consider two countries, China and South Africa, both producing textiles and beer. The table below shows output rates per day in the two (2) countries, if all resources are fully and efficiently employed. Textiles BeerChina 5 10South Africa 1 6 Q1 Which of the following statements are correctThere is no opportunity for mutually beneficial trade between the two (2) countries.China has a comparative advantage in the production of textiles and beer.South Africa has a comparative advantage in the production of beer.The countries will not trade with each other as China can produce more of both goods without trading with South Africa

From the given table we can observe that if all resources are fully employed then China can produce…

Answered: Consider two countries, China and South…

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

Section: Chapter Questions

Problem 6PA

See similar textbooks

Related questions

Concept explainers

Question

Consider two countries, China and South Africa, both producing textiles and beer. The table below shows output rates per day in the two (2) countries, if all resources are fully and efficiently employed.

Textiles Beer

China 5 10

South Africa 1 6

Q1 Which of the following statements are correct

There is no opportunity for mutually beneficial trade between the two (2) countries.
China has a comparative advantage in the production of textiles and beer.
South Africa has a comparative advantage in the production of beer.
The countries will not trade with each other as China can produce more of both goods without trading with South Africa

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

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions