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Below is the data for the maximum production of the only two products for the countries...

Below is the data for the maximum production of the only two products for the countries of Oz and Zas. Oz: 10 food units or 14 equipment units Zas: 18 food units or 10 equipment units a. If each country is self-sufficient, with no trade between them, and each uses one-half of their resources to produce each of the two products, what is the output in each country. Fill in the table below. Country Output of food units Output of equipment units Oz Zas b. Based on part (a), total production of food is units and total production of equipment is units. c. If, instead, each country specializes and produces only the product that it can produce best, what will be the output in each country? Fill in the table below. Country Output of food units Output of equipment units Oz Zas d. Now, based on part (c), total production of food is units and total production of equipment is units. e. The gains as a result of specialization are more units of food produced and more units of equipment produced.

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Answer #1

Solution:

(a)

Food unit Equipment unit
OZ 10/2=5 14/2=7
Zas 18/2=9 10/2=5

(b) Total units of food = 5+9 = 14

Total units of equipments = 7+5 = 12

(c) Since country Oz has absolute advantage in production of equipment, it will specialize in equipment.

Since country Zas has absolute advantage in production of food, it will specialize in food.

Food unit Equipment unit
OZ 0 14
Zas 18 0

(d) Total units of food = 18

Total units of equipments = 14

(e) Gain in food production as a result of specialization = 18-14 = 4

Gain in equipment production as a result of specialization = 14-12 = 2

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