I need an answer to the following question: Let\'s take on a problem on comparat
ID: 1209064 • Letter: I
Question
I need an answer to the following question:
Let's take on a problem on comparative advantage, absolute advantage, and terms of trade! Here are the production possibilities for Nation A and Nation B.
Nation A
Nation B
Pearls
Pineapples
Pearls
Pineapples
0
50
50
0
5
40
40
5
10
30
30
10
15
20
20
15
20
10
10
20
Who has the comparative advantage for pineapples? How did you get it?
Who has the comparative advantage for pearls? How did you get it?
Nation A
Nation B
Pearls
Pineapples
Pearls
Pineapples
0
50
50
0
5
40
40
5
10
30
30
10
15
20
20
15
20
10
10
20
Explanation / Answer
1. Nation A has comparative advantage in the production of Pineapples because the country produces 50 pineapples against 0 pearls being produced. Also the total output of pineapples are greater than the total amount of Pearls produced. For every 50 pearls that are produced, 150 pineapples are being produced.
2. Nation B has a comparative advantage for pearls since the country produces 50 pearls when it concentrates entirely on the production of pearls. Also the total output of pearls are greater than the total amount of pineapples being produced. For every 50 pineapples that are produced, a total of 150 pearls are produced.
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