Production Advantage and Opportunity CostsAssume there are two countries, the United States and France, and two goods, automobiles and computers.The table presented below shows the number of automobiles and computers that the United States and France can produce with the same amount of resources. United StatesFranceAutomobiles 120100Computers 6055Source: Pearson Education Inc. 1.1 Which country has an absolute advantage in computer production? Motivate your answer.Which country has a comparative advantage in the production of automobiles? Motivate your answer. Assume these countries trade with one another under the conditions of free trade. Which country will specialise in the production of automobiles? Motivate your answer. If free trade exists between the United States and France, what are the highest and lowest levels for the price of an automobile (expressed in terms of computers)? Motivate your answer by stating which level favours the United States and France.

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Answered: Production Advantage and Opportunity…

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

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Production Advantage and Opportunity Costs

Assume there are two countries, the United States and France, and two goods, automobiles and computers.

The table presented below shows the number of automobiles and computers that the United States and France can produce with the same amount of resources.

	United States	France
Automobiles	120	100
Computers	60	55

Source: Pearson Education Inc.

1.1 Which country has an absolute advantage in computer production? Motivate your answer.

- Which country has a comparative advantage in the production of automobiles? Motivate your answer.
Assume these countries trade with one another under the conditions of free trade. Which country will specialise in the production of automobiles? Motivate your answer.

If free trade exists between the United States and France, what are the highest and lowest levels for the price of an automobile (expressed in terms of computers)? Motivate your answer by stating which level favours the United States and France.

Definition Video Definition Ability of a country to produce more output with a given level of input or to produce the same level of output with a lower level of input as compared to the other countries. For example, if Country A produces 200 units with the help of 10 units of labor, and Country B produces 300 units with 10 units of labor, Country A has an absolute advantage in the production of the good. Video

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