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Suppose there are 2 Economies. In each economy there are 2 outputs, bacon and eggs, which are produced with perfectly substitutable inputs. In Economy A 10 Eggs or 4 bacons can be produced with complete specialization. In Economy B 3 bacons and 12 eggs can be produced with complete specialization. Which economy has the absolute advantage in bacon? In eggs? Which economy has the comparative advantage in bacon? In Eggs? If each economy specialized in its comparative advantage, what range of prices would bacon trade at in terms of eggs?

Microeconomics, Economics

  • Category:- Microeconomics
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