Answered: The country of "Econoland" can use its…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter33: International Trade

Section: Chapter Questions

Problem 30P: In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10...

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The country of "Econoland" can use its resources to produce either 500 tons of crab or 200 tons of plywood. Its rival, "Arcadonia," is able to produce either 200 tons of crab or 100 tons of plywood.From this passage, it can be concluded that

Arcadonia should specialize in producing plywood.

Econoland has a comparative advantage in plywood.

Arcadonia has an absolute advantage in the production of both crab and plywood.

Econoland should specialize in producing plywood, and trade them with Arcadonia for crabs.

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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