Question

Suppose there are only 2 nations A and B, and only two goods, x and y. If nation A produces only x, it can make 16x per day. If nation A produces only y, it can make 4y per day. If nation B produces only x, it can make 20x per day. If nation B produces only y, it can make 4y per day. After trade begins, nation ________ will specialize in the production of x and nation ________ will specialize in the production of y.

Answer 1

nation A nation B

good x 16 20

good y 4 4

from the above table it is clear that nation B has a comparative advantage in producing good X if it only produces x whereas both A and B produce same number of good y.

After trade begins, nation __B______ will specialize in the production of x and nation ____A___ will specialize in the production of y.

since both A and B produce same units of Y , any country would be able to produce it but since B produces more units of good x when it produces only x , it is beneficial for country A to produce y good alone.