Refer to the table above. Assume that England and Spain can switch between produ
ID: 3205396 • Letter: R
Question
Refer to the table above. Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. At which of the following prices would both England and Spain gain from trade with each other?
a. 16 units of bread for 16 units of cheese
b. 16 units of bread for 24 units of cheese c. 16 units of bread for 48 units of cheese
d. England and Spain could not both gain from trade with each other at any price
Answer is C 16 units of bread for 48 units of cheese but do not know how to do problem
Labor Hours Needed to Make 1 Unit of Number of Units Produced in 40 Hours Cheese Bread heese Bread A 40 England 1 10 4 8 10 5 SpainExplanation / Answer
From the table
The opportunity cost of 1 unit of cheese for England is 1/4 unit of bread.
The opportunity cost of 1 unit of cheese for Spain is 1/2 unit of bread.
The opportunity cost of 1 unit of bread for England is 4 units of cheese.
The opportunity cost of 1 unit of bread for Spain is 2 units of cheese.
16 units of bread for England is an 64 units of Cheese.
16 units of bread for Spain is 32 units of cheese.
If you look at the table England has an absolute advantage in both goods and Spain has an absolute advantage in the production of neither good.
If England and Spain engage in trade, then England should specialize in the production of cheese and Spain should specialize in the production of bread.
Option C both England and Spain gain from each other with 16 bread and 48 cheese.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.