Question: [elated to Solved Problem 2.2 on page 95] Suppose that France and Germany both produce schnitzel and wine. The following table shows combinations of the

[elated to Solved Problem 2.2 on page 95] Suppose that France and Germany both produce schnitzel and wine. The following table shows combinations of the goods that each country can produce in a day:

France Germany Wine

(bottles)

Schnitzel

(pounds)

Wine

(bottles)

Schnitzel

(pounds)

0 8 0 15 1 6 1 12 2 4 2 9 3 2 3 6 4 0 4 3 5 0

a. Who has a comparative advantage in producing wine? Who has a comparative advantage in producing schnitzel?

b. Suppose that France is currently producing 1 bottle of wine and 6 pounds of schnitzel, and Germany is currently producing 3 bottles of wine and 6 pounds of schnitzel. Demonstrate that France and Germany can both be better off if they specialize in producing only one good and then trade for the other.

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