• The MPL in the coffee industry in China is 5 and in the rice industry is 10. The MPL in the coffee industry in Italy is 3 and in the rice industry is 9. China has 1,000 workers while Italy has 1,500 workers.

  A. Which country has a comparative advantage in producing coffee? Rice?

  B. Let's assume there is complete specialization and that the two countries trade 1,400 coffees at terms of trade of 1 coffee = 2.5 rice. Construct a table showing the quantities of production, trade, and consumption of the two goods in the two countries.

  C. Draw the production possibility frontier, consumption possibility frontier, and trade triangle for China with proper labels. Assume complete specialization.

  D. Draw the production possibility frontier, consumption possibility frontier, and trade triangle for Italy with proper labels. Assume complete specialization.

  
  

  

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A Comparative Advantage in Producing Coffee and Rice The country with a comparative advantage in producing a good is the one that has a lower opportun... View the full answer