Question
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
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