each country uses only laboor to produoe Suppose Taiwan and Canada produce only
ID: 1104163 • Letter: E
Question
each country uses only laboor to produoe Suppose Taiwan and Canada produce only cell phones and digital music players Assume tht The table below shows how much each country can produce of each good with one hour Output per Hour of Labor Phones Digital Musle Players Canada and the countries are currenty producing amountsof Suppose that Tawan and Canads do not trade with each other Ech has 500 hours of labor with which to produce cel phones and digital music players each good shown in the table below Consumption with 500 Hours of Labor Canada 800 800 Assume now that each country specialines in producing that good in which it has a comparative advartage Further, assume for simplcity that one cell phone can be traded for one digtal music player phones for 800 digtal i players with Cand, same number of digtal musie players andadaitional cel and and Canada wil be able to consume the sene mnt erofcentenes ond[ ]addlinal dua. music player, "usponu" 4ary anExplanation / Answer
Opportunity cost of 1 cell phone in Taiwan =16/23=0.695 digital music player
Opportunity cost of 1cell phone in canada is 0.25 digital music player
Thus Canada has comparative advantage in cell phones and Taiwan has Comparative advantage in Digital music player
Canada will produce 23*500=11500 and Taiwan will produce digital music player=500*8=4000
By trading Taiwan will consume 10700 cell phones and additional cell phone is 350.
By trading Canada will consume800 cellphones and 3200 digital musoc player and additional musoc player is 2400
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