Question: Consider the example where there are two countries, A and B, who can each produce only sugar and salt. The production possibilities of Country A

  1. Consider the example where there are two countries, A and B, who can each produce only sugar and salt. The production possibilities of Country A are such that if they concentrated 100% of their resources into the production of sugar, they could produce 250 lbs of sugar, and if 100% in salt then 150 lbs of salt. For Country B, if they concentrated 100% in sugar then 200 lbs of sugar, and if in salt then 100 lbs of salt. Assume the production possibilities curve is linear.

  1. What is Country A opportunity cost for 1 lb of salt? 1.5pt

  1. What is Country B opportunity cost for 1 lb of sugar? 1.5pt

  1. Who has the comparative advantage in producing salt & Why? 2pt

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