4. Using the same amount of resources, the United States and Canada can both pro
ID: 1134583 • Letter: 4
Question
4. Using the same amount of resources, the United States and Canada can both produce lumberjack shirts and lumberjack boots as shown in the following production possibilities frontier: (Make sure to show all of your work for the questions below.) United States Canada of shirts made 12 Quantity of shirts made 3 4 Quantity0 of boots 3 Quantity of boots made made a. (0.2 pt) What is the United States' opportunity cost of producing a shirt? b. (0.2 pt) What is the United States' opportunity cost of producing a pair of boots? 0.2 pt) What is Canada's opportunity cost of producing a shirt? d. (0.2 pt) What is Canada's opportunity cost of producing a pair of boots? e. (0.1 pt) Which country has a comparative advantage in producing boots? f. (0.1 pt) Which country has a comparative advantage in producing shirts? g. (0.1 pt) Does either country have an absolute advantage in producing both goods? Explain. h. (0.5 pt) Suppose that both countries are currently producing 3 pairs of boots and 3 shirts. Show that both can be better off if they specialize in producing one good and then engage in trade.Explanation / Answer
Shirts
Boots
Opportunity cost of shirt
Opportunity cost of Boots
USA
12
4
0.33
3.00
Canada
6
6
1.00
1.00
a. The opportunity cost of producing a shirt for US is 0.33 pair of boots.
=4/12 = 0.33
b. The opportunity cost of producing a pair of boots for US is 3shirt
=12/4 = 3
c. The opportunity cost of producing a shirt for Canada is 1 pair of boots.
=6boots/6 shirts = 1
d. The opportunity cost of producing a pair of boots for Canada is 1 is shirt
=6shirts/6boots = 1
e. Canada has comparative advantage in producing boots as it has to forgo only 1 shirt whereas the US needs to forgo 3 shirts
f. US has comparative advantage in producing shirts as it has to forgo only 0.33 shirt whereas the US needs to forgo 1 shirts
g. No, in terms of absolute advantage US can produce 12 shirts and Canada can produce 6 Boots
h. Since both countries do not have comparative either of them can engage in specializing any f the good
Shirts
Boots
Opportunity cost of shirt
Opportunity cost of Boots
USA
3
3
1.00
1.00
Canada
3
3
1.00
1.00
Shirts
Boots
Opportunity cost of shirt
Opportunity cost of Boots
USA
12
4
0.33
3.00
Canada
6
6
1.00
1.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.