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Suppose France can produce 9,000 potatoes or 3,000 lemons per day, and that Italy can produce 3,000 potatoes or 3,000 lemons per day. Which of the following statements in this context is true?

a. Italy has a comparative advantage in producing potatoes.

b. Italy would be willing to trade one lemon for anything greater than one potato.

c. Both countries would be willing to trade at a rate of one lemon for one potato.

d. France has a comparative advantage in producing lemons.

e. France has an absolute advantage in producing lemons

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Related questions

Suppose that two people, Michelle and James each live alone in an isolated region. They each have the same resources available, and they grow potatoes and raise chickens. If Michelle devotes all her resources to growing potatoes, she can raise 200 pounds of potatoes per year. If she devotes all her resources to raising chickens, she can raise 50 chickens per year. (If she apportions some resources to each, then she can produce any linear combination of chickens and potatoes that lies between those extreme points. If Jamesdevotes all his resources to growing potatoes, he can raise 80pounds of potatoes per year. If he devotes all his resources to raising chickens, he can raise 40 chickens per year. (If he apportions some resources to each, then he can produce any linear combination of chickens and potatoes that lies between those extreme points.)
Potatoes Chickens
Michelle 200 50
James 80 40

What is Michelle's opportunity cost of producing potatoes?
What is Michelle's opportunity cost of producing chickens?
What is James's opportunity cost of producing potatoes?
What is James's opportunity cost of producing chickens?
Which person has an absolute advantage in which activities?
Which person has a comparative advantage in potatoes?
Which person has a comparative advantage in chicken?
Suppose that they are thinking of each specializing completely in the area in which they have a comparative advantage, and then trading at a rate of 2.5 pounds of potatoes for 1 chicken, would they each be better off? Explain.
How would you extend the above narrative to businesses, society as a whole, or nations? Explain.

Suppose two people, Michelle and James each live alone in anisolated region. Both have the same resources available, and thegrow potatoes, and raise chickens. If Michelle devotes all herresources to growing potatoes, she can raise 200 pounds of potatoesa year. If she devotes all her resources to raising chickens, shecan raise 50 chickens per year. (If she apportions some resourcesto each, then she can produce any linear combination of chickensand potatoes that lies between those extreme points. If Jamesdevotes all his resources to growing potatoes, he can raise 80pounds of potatoes per year. If he devotes all his resourcesraising chickens, he can raise 40 chickens a year. ( If heapportions some resources to each, the he can produce any linearcombination of chickens and potatoes that lies between thoseextreme points).



1. What is Michelle's opportunity cost of producing potatoes?

2. What is Michelle's opportunity cost of producing chickens?

3. What is James' opportunity cost of producing potatoes?

4. What is James' opportunity cost of producing chickens?

5. Which person has an absolute advantage in whichactivities?

6.Which person has comparative advantage in potatoes?

7. Which person has comparative advantage in chickens?

8. Suppose that they are thinking of each specializing completelyin the area in which they have a comparative advantage, and then ata rate of 2.5 pounds of potatoes for 1 chicken,would they each bebetter off?

Explain

9. How would you extend the above narrative to businesses, societyas a whole or nations? Explain

Suppose that two people, Michelle and James each live alone in an isolated region. They each have the same resources available, and they grow potatoes and raise chickens. If Michelle devotes all her resources to growing potatoes, she can raise 200 pounds of potatoes per year. If she devotes all her resources to raising chickens, she can raise 50 chickens per year. (If she apportions some resources to each, then she can produce any linear combination of chickens and potatoes that lies between those extreme points. James devotes all his resources to growing potatoes, he can raise80 pounds of potatoes per year. If he devotes all his resources to raising chickens, he can raise 40 chickens per year. (If he apportions some resources to each, then he can produce any linear combination of chickens and potatoes that lies between those extreme points.)



Potatoes
Chickens

Michelle
200
50

James
80
40

What is Michelle's opportunity cost of producing potatoes?
What is Michelle's opportunity cost of producing chickens?
What is James' opportunity cost of producing potatoes?
What is James' opportunity cost of producing chickens?
Which person has an absolute advantage in which activities?
Which person has a comparative advantage in potatoes?
Which person has a comparative advantage in chicken?
Suppose that they are thinking of each specializing completely in the area in which they have a comparative advantage, and then trading at a rate of 2.5 pounds of potatoes for 1 chicken, would they each be better off? Explain.
How would you extend the above narrative to businesses, society as a whole or nations? Explain.

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