Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

There are two countries, Lilliput and Blefuscu, which produce two goods: cilantroand hummus. In a single year, Lilliput can produce 4,000 tons of cilantro or

There are two countries, Lilliput and Blefuscu, which produce two goods: cilantroand hummus. In a single year, Lilliput can produce 4,000 tons of cilantro or 4,000 tonsof hummus. In the same period of time, Blefescu can produce 500 tons of cilantro or300 tons of hummus

.(a) Which country has absolute advantage in cilantro?(5%)

(b) Which country has absolute advantage in hummus?(5%)

(c) Which country has a comparative advantage in cilantro?(10%)

(d) Which country has a comparative advantage in hummus?(10%)

(e) Prior to trade, Lilliput makes 2,000 tons of cilantro, and Blefuscu makes 300tons of cilantro. Draw these allocations on separate Production Possibilities Frontiersfor each country.(10%)

(f) Considering the situation in (e), suppose that Lilliput gives Blefuscu 50 tons ofhummus in exchange for 60 tons of coriander. Is this a beneficial trade for both

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial economics applications strategy and tactics

Authors: James r. mcguigan, R. Charles Moyer, frederick h. deb harris

12th Edition

9781133008071, 1439079234, 1133008070, 978-1439079232

More Books

Students also viewed these Economics questions

Question

LO10.2 List the conditions required for purely competitive markets.

Answered: 1 week ago