The following table shows the hypothetical labor requirements per ton of wool and per hand-knotted rug for New Zealand and for India.

Labor Requirements per Unit

New Zealand India

Per ton of wool 10 hours 40 hours

Per hand-knotted rug 60 hours 80 hours

a. Which country has an absolute advantage in which product? (Name one country for each product.)

b. Calculate the opportunity cost in each country for each of the two products. Which country has a comparative advantage in which product? (Name one country for each product.)

c. If India produces one more rug and exports it to New Zealand, what is the lowest price (measured in tons of wool) that India would accept? What is the highest price (measured in tons of wool) that New Zealand would pay?