2. (10 points) The following table shows the production of two goods in United States and France. The numbers given are the output of each good per labor hour

United States France

Bottles of Wine 12 15

Computers 8 6

(a) Which country has an absolute advantage in Wine? Which country has an absolute advantage in computers?

(a) Calculate the opportunity cost of producing Wine and Computers for the United States.

(b) Calculate the opportunity cost of producing Wine and Computers for France.

(c) Which country has a comparative advantage in Wine and will therefore specialize in production of Wine?

(d) Which country has a comparative advantage in Computers and will therefore specialize in production of Computers?

(e) Is the specialization based on comparative advantage different from the specialization based on absolute advantage (as determined in (a)).

(f) What good does the U.S. buy from France? What is the maximum price the U.S. will pay for this good? What is the minimum price France will accept for this good?

(g) What good does France buy from the U.S.? What is the maximum price France will pay for this good? What is the minimum price the United States will accept for this good?