q17

China and India have the resources to produce textiles and toys

India produces 10 units of textiles per hour of labor and 20 units of toys per hour

China produces 10 units of textiles per hour and 10 units of toys per hour

1. Determine the competitive advantage of each of these two countries and explain the international trade between the 2.

2. Suppose that India has 20,000 working hours and China 35,000 working hours. Calculate the quantities produced by each country, assuming that they specialize in the product with a competitive advantage (the total number of working hours are devoted to the product with a competitive advantage)

3. China will export 50,000 toys to India and import 10,000 units of textiles. Calculate the quantities that these two countries can consume for the 2 products.