Assume the followings: Strawberry and curtain are the only two products produced

Question

Assume the followings: Strawberry and curtain are the only two products produced in these islands. There are constant ratios of input to output whatever the level of output of strawberry and curtain. Lastly, competition prevails in all markets. Answer the following 5 questions based on this table.

Which country has absolute advantage in which good?

Birdy has an absolute advantage in producing both strawberry and curtain.

Ducky has an absolute advantage in producing both strawberry and curtain.

Birdy has an absolute advantage in producing strawberry whereas Ducky has an absolute advantage in producing curtain.

Birdy has an absolute advantage in producing curtain whereas Ducky has an absolute advantage in producing strawberry.

THEN Which country has comparative advantage in which good?

Inputs per unit of strawberry output Inputs per unit of curtain output Birdy Island 60 80 Ducky Island 40 40

Explanation / Answer

Answer 1.b)

Ducky has absolute advantage in prOducing both strawberries as well as curtains because it produces same i.e a single unit of both products requiring lesser amount of inputs than buddy islands for both the products. That is what we call absolute advantage

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