Units of resource required for 1 unit production Rice Riceland Wheatland Wheat 6

Question

Units of resource required for 1 unit production Rice Riceland Wheatland Wheat 6 Which country has the absolute advantage in rice production? (2 points) Which country has the absolute advantage in wheat production? (2 points) Suppose that riceland and wheatland agree to trade on one-to-one basis-a unit of rice costs a unit o wheat, and vice versa, please demonstrate the benefits each country gets from the trade (7 points). Please also draw the picture to show the benefits of each country. (4 points)

Explanation / Answer

A) Riceland has the absolute advantage in rice Production

B) Wheatland has the absolute advantage in wheat production.

Since both countries have absolute advantage in the respective goods, so riceland can produce the rice and exchange it for wheat produced by wheatland. So the trade matrix would be:

Units of resouces required for 1 unit production Rice Wheat Riceland 9 0 Wheatland 2 7

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