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Comparative advantage and terms of trade.

Suppose two nations are considering specializing in either calculators or personal computers. If solely producing calculators, country A can produce 300 and country B can produce 400. If solely producing personal computers, country A can produce 150 and country B can produce 100. Assume their labor forces are of equivalent size.

(a) Illustrate which nation has the comparative advantage in calculators in computers?

(b) It is predicted that current demand will yield an exchange of 3 calculators for every 1 computer. Will trade occur? If not, is it because both countries are against trade?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M919654

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