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1. South Korea has 25,000 labor hours per month to use to produce either textiles (T) or cars (C). Malaysia has 30,000 hrs. To produce
1. South Korea has 25,000 labor hours per month to use to produce either textiles (T) or cars (C). Malaysia has 30,000 hrs. To produce one unit of textiles requires 20 hours in South Korea and 15 hours in Malaysia. To produce one unit of cars takes 50 hours in South Korea and 75 hours in Malaysia. Thus, South Korea can produce 1250 T or 500 C, while Malaysia can produce 2000 T or 400 C as shown in the Table. Country Textiles (T) Cars (C) South Korea 1250 Malaysia 2000 500 400 (a). Compute the opportunity cost of producing one unit of T in South Korea, and opportunity cost of producing one unit of T in Malaysia [1 mark]. (b) Which country has comparative advantage in T and which has comparative advantage in C? [1 mark] (c). Suppose when the two countries are not trading (Autarky) South Korea and Malaysia each share the labor equally between T and C. When they are allowed to trade, South Korea produces 300 C with the rest of labor used to produce T, while Malaysia produces 1200 units of T with the rest of labor used to produce C. Show the gains from trade for each country [3 marks]
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