Question: Absolute and Comparative Advantage
For the following Cases (X, Y and Z), determine:
a) Who has the absolute advantage at producing Cigar?
b) Who has the comparative advantage at Bourbon?
c) What is the relative price of Bourbon in terms of Cigars in Autarky in both countries?
d) If the 2 countries open to trade, there will be ONE world price (Terms of Trade); what is the interval (i.e. the min and the max) of Terms of Trade under which trade is beneficial?
e) What is the range of possible Relative Wage Ratio under which trade based on comparative is mutually beneficial?
