This question pertains to the addendum to Chapter 2.

The following tables show the production possibilities for two hypothetical countries, Italia and Nire. Which country has the comparative advantage in producing butter? Which country has the comparative advantage in producing guns? What would be a mutually agreeable rate of exchange between the countries?

Transcribed Image Text:

Italia Nire Guns Butter Guns Butter 12 0 16 0 8 2 12 1 4 4 8 2 0 6 4 3 0 4