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The USA and the UK can each produce two goods - cars and microprocessors. To produce one unit of each good requires different amounts of
The USA and the UK can each produce two goods - cars and microprocessors. To produce one unit of each good requires different amounts of labour hours as an input to production. The following table summarises the production capabilities of each country: Table 1 Production capabilities of the USA and UK Output from 1 hour of labour Output from 1 hour of labour Cars Microprocessors USA 0.2 5 UK 0.1 1 Rewrite this table in terms of the opportunity cost of producing one car in terms of units of microprocessors, and the opportunity cost of producing one microprocessor in terms of units of cars. (1 Point) Does any country have an absolute advantage in the production of any good? Explain why/why not? Does any country have a comparative advantage in the production of any good? Explain.(3 Points) Assuming each country has 10 hours of labour available, draw the production possibility frontiers for the USA and for the UK without trade. Put Cars on the vertical axis and put microprocessors on the horizontal axis. Make sure that you label all intercepts. (2 Points) Again, assuming that each country has 10 labour hours available, what is the maximum number of cars that
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