1.The countries of Orion and Scorpius are small mountainous nations. Both produce granite and blueberries. Each nation has a labor force of 800. The following table gives production per month for each worker in each country. Assume productivity is constant and identical for each worker in each country.

a. Which country has an absolute advantage in the production of granite? Which country has an absolute advantage in the production of blueberries?

b. Which country has a comparative advantage in the production of granite? of blueberries?

c. Sketch the ppf’s for both countries.

d. Assuming no trading between the two, if both countries wanted to have equal numbers of tons of granite and bushels of blueberries, how would they allocate workers to the two sectors?

e. Show that specialization and trade can move both countries beyond their ppf’s.

Transcribed Image Text:

Orion workers Tons of Granite Bushels of Blueberries 6 Scorpius workers 3 18 12 Productivity of one worker for one month