MICRO HW 2 - Spring08Econ 003: Microeconomics Assignment #...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Spring08Econ 003: Microeconomics Assignment # 02 Production possibilities for two countries Cloth (yards) Cloth (yards) 20 10 40 Wheat (bushels) 10 Wheat (bushels) USA UK 1. The production possibility frontiers of USA and UK are drawn above. The frontiers show that no country has absolute advantage in both cloth and wheat, but USA has absolute advantage in wheat and UK has absolute advantage in cloth. As regards comparative advantage, it can be said that: A. USA has comparative advantage in wheat because the opportunity cost of wheat in USA is ¼ yard of cloth whereas it is 2 yards of cloth in UK B. UK has comparative advantage in cloth because the opportunity cost of cloth in UK is ½ bushel of wheat whereas it is 4 bushels of wheat in USA C. No country has comparative advantage in any good. D. A and B are both correct. 2. From the information given in question #1, it appears that A. USA should specialize in cloth and buy wheat from UK. B. UK should specialize in cloth and buy wheat from USA.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

MICRO HW 2 - Spring08Econ 003: Microeconomics Assignment #...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online