Question

PLEASE show how you arrived at your answers. Thank you. ……………………….Inputs per unit of strawberry output…………Inputs...

PLEASE show how you arrived at your answers. Thank you.

……………………….Inputs per unit of strawberry output…………Inputs per unit of curtain output

Birdy Island                                         60 ..............................................................80

Ducky Island                                       40.............................................................. 40

1. Which country has absolute advantage in which good?

                A.            Birdy has an absolute advantage in producing both strawberry and curtain.

                B.            Ducky has an absolute advantage in producing both strawberry and curtain.

                C.            Birdy has an absolute advantage in producing strawberry whereas Ducky has an absolute advantage in producing curtain.

                D.            Birdy has an absolute advantage in producing curtain whereas Ducky has an absolute advantage in producing strawberry.

2. What would be the trade pattern?

                A.            Birdy imports curtain and exports strawberry whereas Ducky imports strawberry and exports curtain.

                B.            Birdy imports strawberry and exports curtain whereas Ducky imports strawberry and exports curtain.

                C.            Birdy imports strawberry and exports curtain whereas Ducky imports curtain and exports strawberry.

                D.            Birdy imports curtain and exports strawberry whereas Ducky imports curtain and exports strawberry.

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Homework Answers

Answer #1

a) An absolute advantage is a situation when one trading partner can produce both the goods at a relatively lower cost. Here, Ducky island can produce both the strawberry and curtain using less input compared to Birdy Island. the answer is "B", Ducky has an absolute advantage in the production of both the goods.

b) Trade pattern is based on comparative advantage. A nation having a less absolute disadvantage in any product has a comparative advantage in the production of that goods. Birdy has a less absolute disadvantage in the production of Strawberry. So, they will export strawberry.

The answer is "A", Birdy will import curtains and export strawberry whereas Ducky imports strawberry and exports curtain.

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