Unit 3 Topic 1 Comparative Advantage

Country X can produce 500 units of computers or 200 units of smartphones, while Country Y can produce 100 units of computers or 50 units of smartphones. Calculate the opportunity cost of producing one unit of computers in terms of smartphones for each country. Based on your calculations, which of the following statements is correct?

• Country X: 500/200 = 1.5 smartphones, Country Y: 100/50 = 1 smartphone
• Country X: 500/200 = 2.5 smartphones, Country Y: 100/50 = 2 smartphones
• Country X: 500/200 = 3 smartphones, Country Y: 100/50 = 2 smartphones
• Country X: 500/200 = 0.4 smartphones, Country Y: 100/50 = 0.5 smartphones

Country X can produce 500 units of computers or 200 units of smartphones, while Country Y can produce 100 units of computers or 50 units of smartphones. Calculate the opportunity cost of producing one unit of computers in terms of smartphones for each country. Based on your calculations,which is the correct statement

• Country X should specialise in smartphones.

• Country X should specialise in computers

• Country Y should specialise in smartphones

• There is no point in specialising and trading

Country A can produce 600 units of wheat or 300 units of corn, while Country B can produce 200 units of wheat or 50 units of corn. Calculate the opportunity cost of producing one unit of wheat in terms of corn for each country. Based on your calculations, identify which country has a comparative advantage in producing wheat and which has a comparative advantage in producing corn and decide what each country should specialize in as a basis for trade.

• Country A has a comparative advantage in producing corn, and Country B has a comparative advantage in producing wheat. Country A should specialize in producing wheat, and Country B should specialize in producing corn as a basis for trade.
• Country A has a comparative advantage in producing wheat, and Country B has a comparative advantage in producing corn. Country A should specialize in producing wheat, and Country B should specialize in producing corn as a basis for trade.
• Country A has a comparative advantage in producing both wheat and corn, and Country B has no comparative advantage. Both countries should specialize in producing both wheat and corn as a basis for trade.
• Country A has a comparative advantage in producing corn, and Country B has a comparative advantage in producing wheat. Country A should specialize in producing corn, and Country B should specialize in producing wheat as a basis for trade.

Country M can produce 400 units of shirts or 100 units of shoes, while Country N can produce 200 units of shirts or 50 units of shoes. Calculate the opportunity cost of producing one unit of shirts in terms of shoes for each country. Based on your calculations, identify which country has a comparative advantage in producing shirts and which has a comparative advantage in producing shoes and decide what each country should specialize in as a basis for trade.

• Neither country has a comparative advantage in producing shirts or shoes.
• Both countries have a comparative advantage in producing shirts and shoes.
• Country N has a comparative advantage in producing shirts and Country M has a comparative advantage in producing shoes.
• Country M has a comparative advantage in producing shirts and Country N has a comparative advantage in producing shoes.

Country Z can produce 300 units of bicycles or 50 units of motorcycles, while Country W can produce 150 units of bicycles or 25 units of motorcycles. Calculate the opportunity cost of producing one unit of bicycles in terms of motorcycles for each country. Based on your calculations, identify which country has a comparative advantage in producing bicycles and which has a comparative advantage in producing motorcycles and decide what each country should specialize in as a basis for trade.

• Both countries should specialize in producing motorcycles for trade

• Both countries should specialize in producing bicycles for trade.
• Country Z should specialize in producing bicycles and Country W should specialize in producing motorcycles for trade.

• Country Z should specialize in producing motorcycles and Country W should specialize in producing bicycles for trade.