Assume that all costs are constant, and answer the questions below. SHOW YOUR MA

Question

Assume that all costs are constant, and answer the questions below. SHOW YOUR MATH. (Please)

Consider two countries: France and Belgium. They both can use workers, to produce beer and wine. Use the following information on both countries to answer the questions below.

France: France has 100 workers available. Those 100 workers can be used to produce the following combinations of beer and wine.

a) Which country has absolute advantage in the production of wine? How do we know?

b) Which country has absolute advantage in the production of beer? How do we know?

c) In terms of bottles of wine, what is the opportunity cost to France of producing one bottle of beer?

d) In terms of bottles of wine, what is the opportunity cost to Belgium of producing one bottle of beer?

e) In terms of bottles of beer, what is the opportunity cost to France of producing one bottle of wine?

f) In terms of bottles of beer, what is the opportunity cost to Belgium of producing one bottle of wine?

g) Do potential gains from trade exist between these two countries? If so, why and which good will each country specialize in?

Explanation / Answer

a) Fance has absolute advantage in the production of wine. because at full production france produce 3000 wines and belgium produce 150 wine b)similarly france hav advantage for beer too.. 1000 france 300 belgium c)3000/1000 =3 d)150/300 =0.5 e)1000/3000 =0.33 f)300/150 =2 g)yeah wine from france ro belgium and beer from belgium to france

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