For each question the assumptions for absolute and relative advantage
Problem 1. Each nation has 1500 unt of resources availabe. To produce one unit of output, the following amount of input is required:
|
Computer chips |
Computer Displays |
| U.S. |
5 |
10 |
| China |
3 |
15 |
a. Determine the output possibilities for each nation:
b. Graph the PPC for each nation. (both nations on a single raph)
c. According to the theory of absolute advantage which good(s) should the U.S. produce and export? And why? (Proof)
d. According to the theory of relative advantage, which good(s) should the U.S. produce and export? And why? (Proof)
Problem 2. Each nation has 1200 units of resources available. To produce one unit of output, the following amount of inputs is required:
|
Automobiles |
Machine Tools |
| Mexico |
6 |
4 |
| Germany |
4 |
3 |
a. Determine the output possibilities for each nation:
b. Graph the PPC for each nation. (both nations on a single graph)
c. According to the theory of absolute advantage, which good(s) should Mexico produce and export? And why? (proof)
d. According to the theory of relative advantage, which good(s) should the Mexico produce and export? And why? (Proof)
Problem 3. Each nation has 900 units of resources available. To produce one unit of output, the following amount is required:
|
Jest |
Lumber |
| Brazil |
6 |
3 |
| India |
10 |
5 |
a. Determine the output possibilities for each nation:
b. Graph the PPC for each nation. (both nations on a single graph)
c. According to the theory of absolute advantage, which good(s) should Brazil produce and export? And why? (Proof)
d. According to the theory of relative advantage, which good(s) should Brazil produce and export? And why? (Proof)