6. If with one hour of labor time nation A can produce either 3X or 3Y while nat

Question

6. If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input):
a. nation A has a comparative disadvantage in commodity X
b. nation B has a comparative disadvantage in commodity Y
c. nation A has a comparative advantage in commodity X
d. nation A has a comparative advantage in neither commodity


8. With reference to the statement in Question 6, if 3X is exchanged for 3Y:
a. nation A gains 2X
b. nation B gains 6Y
c. nation A gains 3Y
d. nation B gains 3Y

9. With reference to the statement of Question 6, the range of mutually beneficial trade between nation A and B is:
a. 3Y < 3X < 5Y
b. 5Y < 3X < 9Y
c. 3Y < 3X < 9Y
d. 1Y < 3X < 3Y

Explanation / Answer

6. If with one hour of labor time nation A can produce either 3X or 3Y while nation B can produce either 1X or 3Y (and labor is the only input): a. nation A has a comparative disadvantage in commodity X b. nation B has a comparative disadvantage in commodity Y c. nation A has a comparative advantage in commodity X d. nation A has a comparative advantage in neither commodity Nation A is only paying (giving up making) 1Y for 1X, while Nation B is giving up 3Y for every 1X, so Nation A has the comparative advantage for good X. 8. With reference to the statement in Question 6, if 3X is exchanged for 3Y: c. nation A gains 3Y Since A has the comparative advantage in good X, he will only make X, and B will only make Y. Pretend we produce for 10 hrs. A will have 10X and 0Y. B will have 0X and 30Y. If we trade 3X for 3Y, Nation A will have 7X, 3Y. Nation B will have 3X, 27Y. 9. With reference to the statement of Question 6, the range of mutually beneficial trade between nation A and B is: c. 3Y < 3X < 9Y The trade rates have to be between the cost of the good to each nation. If you reduce the answer C to 1Y

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