- #1
phynoob
- 10
- 0
This is the question..
Suppose that by devoting all of its resources to the production of A, the nation of Econia can produce 50A. By devoting all of its resources to the production of B, Econia can produce 25B. The comparable figures for the nation of Optima are 5A and 5B. According to the principle of comparative advantage, which nation will specialise in which products? What are the limits to the terms of trade?
My attempt on the question: Econia will produce A and Optima will produce B due to Compa. Advantage.
Limit : 1A=1A to 1B= 2B (im not sure whether it is correct anot)
Can anyone highlight on the methods or a guideline to derive the trade limit for specialisation?
APPRECIATED! :D
Suppose that by devoting all of its resources to the production of A, the nation of Econia can produce 50A. By devoting all of its resources to the production of B, Econia can produce 25B. The comparable figures for the nation of Optima are 5A and 5B. According to the principle of comparative advantage, which nation will specialise in which products? What are the limits to the terms of trade?
My attempt on the question: Econia will produce A and Optima will produce B due to Compa. Advantage.
Limit : 1A=1A to 1B= 2B (im not sure whether it is correct anot)
Can anyone highlight on the methods or a guideline to derive the trade limit for specialisation?
APPRECIATED! :D