200 Rayland 600 Artland 300 NUMBER OF BICYCLES 2) The diagram above shows the pr
ID: 1150291 • Letter: 2
Question
200 Rayland 600 Artland 300 NUMBER OF BICYCLES 2) The diagram above shows the production possibilities curve for two countries: Artland and Rayland. Using equal amounts of resources, Artland can produce 600 hats or 300 bicycles, whereas Rayland can produce 1,200 hats or 300 bicycles. (a) Calculate the opportunity cost of a bicycle in Artland. (1 point) (b) If the two countries specialize and trade, which country will import bicycles? Explain. (2 points) (c) If the terms of trade are 5 hats for 1 bicycle, would trade be advantageous for each of the following? (i) Artland (1 point) (i) Rayland (1 point) (d) If productivity in Artland triples, which country has the comparative advantage in the production of hats? (1 point)Explanation / Answer
Hats
Bicycle
Artland
600(0.5)
300(2)
Payland
1200(0.25)
300(4)
Answer 1:- The opportunity cost of a bicycle in Artland =300 bikes =600 hats
1 bicycle=2 hats
Answer 2:- Bicycle will be imported by Rayland as the lower opportunity cost of producing the bicycle is associated with Artland thus Artland will export bicycle thus these will be imported by Rayland due to higher production opportunity cost.
Answer 3:- Artland will have no trade advantage while Rayland will have it
Answer 4:-
Hats
Bicycle
Artland
1800(0.5)
900(2)
Payland
1200(0.25)
300(4)
The comparative advantage in the hat production will be associated to Rayland.
I REQUEST YOU TO KINDLY RATE THE ANSWER AS THUMBS UP.
Hats
Bicycle
Artland
600(0.5)
300(2)
Payland
1200(0.25)
300(4)
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