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Welcome to the Q&A for ECN/APEC 2010, where you can ask questions and receive answers from your fellow students, the TA, and your professor.

Please only ask questions about the material for the course. Try to create discussions about the material we see in class, instead of just thinking of economics in general (this is an introduction to microeconomics class, not a policy or government class).

For questions and discussions about course organization or other course related topics, come see us after class or during office hours.

Feel free to discuss quiz questions on the Q&A, but do not provide direct answers to quiz questions before the quiz's due date.

Comparative Advantage

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Consider the following figure that represents countries A and B's Production Possibility Frontiers.

image

If each country allocated half of its labor force to the production of each good before trade and were to then each specialize in their comparative advantage and allocate 75 percent of its labor force to the production of that good, world production of Good X would change by _____ and the production of Good Y by _____.

asked Apr 29 by canvas-e25408d8f8d15 (216 points)

1 Answer

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The first step is to figure out how much each country is producing while allocating half of its labor force to each good.

Country A would be producing 20 of good X and 40 of good Y

Country B would be producing 50 of each good

The next step is to determine what country has a comparative advantage for each good.

Country A has a comparative advantage in the production of good Y

Country B has a comparative advantage in the production of good X

 Next is to figure out how much each country would be producing of each good if they were allocating 75% of their labor force to the good they have a comparative advantage in.

Country A will produce 60 units of good Y and 10 units of good X

Country B will produce 75 units of good X and 25 units of good Y
answered Apr 29 by canvas-9dad53739df91 (261 points)
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