Answered: Suppose that the productivity per…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter2: Some Tools Of The Economist

Section: Chapter Questions

Problem 7CQ

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Suppose that the productivity per worker in the milk and cranberry juice industries of Southland and Northland are as follows:

Output in Thousands of Litres
	Milk		Cranberry Juice
Northland	6	Or	3
Sounthland	2	Or	1

a) Which country has the absolute advantage in producing milk?
b) Which country has the absolute advantage in producing cranberry juice?
c) Which country has the comparative advantage in producing milk?
d) Which country has the comparative advantage in producing cranberry juice?
e) According to the theory of comparative advantage, will there be trade? If yes, what is the direction of trade?

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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