Country A can produce either 200 personal computers or 800 tons of potatoes with the same amount of resources.

Country B can produce either 500 personal computers or 1,000 tons of potatoes with the same amount of resources.

1) which country has the absolute advantage in PC? which country has the absolute advantage in potato?

2) which country has the comparative advantage in PC? which country has the comparative advantage in potato?

3) Any trading ratio between which two ratios (of PC to potato) would benefit both countries?

4) Assuming the trading ratio is "PC: tons of potatoes = 1:3". If Country A only produces PC and Country B only produces potato, when they trade,

I.) how many extra tons of potatoes can Country A obtain, comparing to the scenario in which Country A produces potato by itself?

II.)how many extra PCs can Country B obtain, comparing to the scenario in which Country B produces PC by itself?

Answer rating: 100% (QA)

Step 11 1 Country B has the absolute advantage in producing personal comput... View the full answer