Answered: Hours of Labor Required to produce X…

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Economics

Hours of Labor Required to produce X and Y Country A Country B Good X 15 12 Good Y 30 10

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter11: Price And Output Determination: Monopoly And Dominant Firms

Section: Chapter Questions

Problem 1E

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Question

What is the allowable range on A’s wages relative to B’s if trade is flowing between these two countries according to comparative advantage?

Hours of Labor Required to produce X and Y
Country A
Country B
Good X
15
12
Good Y
30
10

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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