Country Specific Advantage Question 2

Country Specific Advantage Question 2 - Country Specific...

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Country Specific Advantage Questions 2 (with answers to part I) The following table represents the hypothetical productivity of Germany and Poland in the automobile business: Engines/day Interiors/day Daily Wage German Workers 10 7 100 EUR Polish Workers 8 6 300 PLN All other components and final assembly are outsourced to other countries (and can be completed instantly from the perspective of the firm). Each car requires one engine and one interior. 1. Which of the following statements is true a. Germany and Poland both have absolute advantages in engines b. Germany has an absolute advantage in the production of engines but not interiors c. Germany has an absolute advantage in the production of engines and interiors d. Poland is at a comparative disadvantage in engines and interiors Explanation: German workers can build more engines and more interiors per day that Polish ones (maybe because the Germans have more robots to help them). 2. The opportunity cost of making engines in Poland is
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