GOV and NPI are two organizations that can each produce two outputs, health screening services, and counseling services. Using all of its staff, GOV can screen a maximum of 4 clients or it can counsel 6 clients. Using all of its staff, NPI can screen a maximum of 6 clients or counsel 12 clients.

My Notes

• NPI has an Absolute Advantage in both screening and counseling
• GOV has a Comparative advantage in screening with an opportunity cost of 1.5 counseled clients (vs. NPI opp cost of 2 counseled clients)
• NPI has a Comparative advantage in counseling with an opportunity cost of 0.5 screened clients (vs. GOV opp cost of 0.67 screened clients)

QUESTION: Suppose GOV and NPI are price takers in a competitive environment, where the price of screening 1 client is 1 client counseled.

1. Will GOV specialize in the production of one good and trade with the rest of the market?
2. Will NPI specialize in the production of one good and trade with the rest of the market?

Please help! Thanks!