1) China and Germany can each produce mp3 players and CD players. China can prod
ID: 1146621 • Letter: 1
Question
1) China and Germany can each produce mp3 players and CD players. China can produce a maximum of 60 each. Germany can produce 70 mp3 players or 40 CD players. How should they trade?
They shouldn't since no one wants CD players.
Germany should produce mp3 players and China should produce CD players.
China should produce mp3 players and Germany should produce CD players.
They should find different trading partners because they need to each have the absolute advantage in both products to make a trade worthwhile.
2)Henry is able to catch 4 deer a day or 6 antelope. John can catch 24 deer a day or 12 antelope. Should they trade? If so, how?
No, John has an absolute advantage in both.
No, John has a comparative advantage in both.
Yes, Henry should hunt deer and John should hunt antelope.
Yes, Henry should hunt antelope and John should hunt deer.
No, only Henry would be better off if they traded.
Explanation / Answer
1) Solution: Germany should produce mp3 players and China should produce CD players.
Explanation: Germany has comparative advantage in mp3 players and China has comparative advantage in CD players.
2) Solution: Yes, Henry should hunt antelope and John should hunt deer
Explanation: Henry has comparative advantage in antelope and John has comparative advantage in deer
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