scenario 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. 1.2 Which country has a comparative advantage in the production of automobiles? Motivate your answer. 1.3 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.
scenario
Production Advantage and
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.
1.2 Which country has a
your answer.
1.3 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.
1.4 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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