In Germany it takes three workers to make one television and four workers to mak

Question

In Germany it takes three workers to make one television and four workers to make one video camera. In Poland it takes six workers to make one television and 12 workers to make one video camera.

a. Who has the absolute advantage in the production of televisions? Who has the absolute advantage in the production of video cameras? How can you tell?

b. Calculate the opportunity cost of producing one additional television set in Germany and in Poland. (Your calculation may involve fractions, which is fine.) Which country has a comparative advantage in the production of televisions?

c. Calculate the opportunity cost of producing one video camera in Germany and in Poland. Which country has a comparative advantage in the production of video cameras?

d. In this example, is absolute advantage the same as comparative advantage, or not?

e. In what product should Germany specialize? In what product should Poland specialize?

Explanation / Answer

Germany       Poland

a.Poland has the absolute advantage in makin television as it requires less worker to make one unit.Poland also has the absolute advantage in making video camera same reason.

b.Germany must give up (4/3)1.33 video camera to produce one tv.Poland must give up (12/6) 2 vc for 1 tv.

Germnay has to give up only 1.33 vc for one tv as compared to poland which has to give up 2. Thus germany can produce tv cheaper and so has a comparative advantage in producing tv.

c) opportunity for producing one vc in germany is (3/4) 0.75 and in poland is 0.50.

Germany has to give up 0.75 of tv to produce one vc whereas, Poland has to give up only .0.50 tv to produce one vc.

Thus poland has Comparative advantage in producing vc

d)both are different

Germany should specialize in making tv whereas poland should specialize in making vc

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.