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B1) Country A has 10 million workers and Country B has 20 million workers. Each worker in Country A can produce 2 units of wine
B1) Country A has 10 million workers and Country B has 20 million workers. Each worker in Country A can produce 2 units of wine and 4 units of fabric in a year. Each worker in Country B can produce 3 units of wine and 5 units of fabric in a year. a) What is Country A's opportunity cost of producing wine (in terms of fabric given up)? What is Country A's opportunity cost of producing fabric (in terms of wine given up)? [2 marks] b) What is the maximum production of wine in country A in a year? What is the maximum production of wine in country B in a year? [2 marks] c) Which country has a comparative advantage in producing fabric? Explain your answer in no more than two sentences. Which country has absolute advantage in producing fabric? Explain your answer in no more than two sentences. [4 marks] d) Which country should import wine? Explain your answer. [2 marks] e) What is the range of trading prices (in terms of fabric) for wine between the two countries? [4 marks]
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