Suppose that Country A and Country B have unit labour requirements for producing one tonne of steel and one tonne of oil shown in the following table: (Look at the image) (a) Determine which country has a comparative advantage in each good. (b) If Country A and Country B each have 100 units of labour, calculate the maximum production of each good for both countries (c) In the absence of trade, Country B uses 20% of its total labour units to produce steel and the rest to produce oil. Country A uses 60% of its total labour units to produce steel and the rest to produce oil. Calculate how many tonnes of steel and oil can be produced by both countries.
Question 1
Suppose that Country A and Country B have unit labour requirements for producing one tonne of steel and one tonne of oil shown in the following table:
(Look at the image)
(a) Determine which country has a
(b) If Country A and Country B each have 100 units of labour, calculate the
maximum production of each good for both countries
(c) In the absence of trade, Country B uses 20% of its total labour units to produce
steel and the rest to produce oil. Country A uses 60% of its total labour units to
produce steel and the rest to produce oil. Calculate how many tonnes of steel and
oil can be produced by both countries.
(d) Both countries agree that one tonne of steel can be exchanged for one tonne of
oil. Calculate the gains after trade is allowed if Country A consumes 30 tonnes of
oil domestically.
![Steel
[Keluli]
Oil
[Minyak]
Unit labour requirements
[Keperluan unit buruh]
Country A
[Negara A]
4
2
Country B
[Negara B]
4
5](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9771e325-6f23-4c3d-90e4-f67f665972b6%2Fd63d6df1-1651-476c-9f63-bf22c07f274b%2Fht6kyir_processed.jpeg&w=3840&q=75)
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