A) The following table illustrates the maximum output in the production of Cars and TVs for

Country A and Country B assuming that only one particular good is being produced.

TV Car

Country A 1000 400

Country B 1100 300

(a) Which country has the absolute advantage in Cars production?

(b) Which country has the absolute advantage in TVs production?

(c) What is the Opportunity cost of one more unit of Cars in Country A?

(d) What is the Opportunity cost of one more unit of Cars in Country B?

(e) Which country has the comparative advantage in TV production?

(f) Which country has the comparative advantage in Cars production?

B) Explain what is the fundamental economic problem?

C) The figure below shows the US Textile Market. S represents the market supply curve of

domestic producers. After imports are allowed, foreign producers shift the market supply to S'.

D is market demand.

Calculate the producer surplus of domestic producers before and after the foreign producers enter the

market.