answer ALL questions and show ALL questions Use the information in the table to
ID: 1198177 • Letter: A
Question
answer ALL questions and show ALL questions
Use the information in the table to answer the following questions
1.
Indicate which country has comparative advantage in what good and specify a range of terms of trade that would be mutually beneficial to both countries.
2. Show that the world can gain from trade with specialization.
3. Using the above terms of trade, show that each country can gain from trade (consumption gains).
Output per Labor Hour Consumption Before Trade Nation Rice Leather Jacket Rice Leather Jacket Sri Lanka 10 20 60,000 120,000 Bangladesh 12 35 50,000 200,000Explanation / Answer
1. Srilanka has comparative advantage in Rice and Bangladesh has comparative advantage in Leather jacket.
2. Bangladesh can produce total 320,000 Leather Jacket with 9143 labor hours. and Srilanka can produce total 110,000 Rice with 11,000 labor hours.Total labor hour spent will be 20,143 labor hours. If individual countries will produce both the goods total labor hours spent will be = 21881 hours (6000 + 6000 + 4167 + 5714).
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