Question
Table 1 shows tonnes of sugar and tonnes of rice that Barbados (BB) and Belize (BZ) can produce with one hour of labour time under
Table 1 shows tonnes of sugar and tonnes of rice that Barbados (BB) and Belize (BZ) can produce with one hour of labour time under four different hypothetical situations. In each case, identify the commodity in which Barbados and Belize have:
(a) an absolute advantage or disadvantage.
(b) comparative advantage or disadvantage.
Table 1
Case A | Case B | Case C | Case D | |||||
BB | BZ | BB | BZ | BB | BZ | BB | BZ | |
Sugar (tonnes/hour) | 4 | 1 | 4 | 1 | 4 | 1 | 4 | 2 |
Rice (tonnes/hour) | 1 | 2 | 3 | 2 | 2 | 2 | 2 | 1 |
5. Suppose that in Case B in Table 1, Barbados exchanges 4S for 4R with Belize.
(a) How much does Barbados gain in terms of R?
(b) How much does Belize gain in terms of R?
(c) What is the range for mutually beneficial trade?
(d) How much would each country gain in terms of R if they exchanged 4S for 6R instead?
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