6. Suppose Afghanistan and South Korea are countries that both produce coffee and tea which are sold for the same price. Below are various combinations the countries can produce using the same amount of capital and labour. Afghanistan South Korea Coffee Tea (Million (Million bags) bags) bags) 117 117 867 Tea (Million bags) Production and consumption before trade 67 (A) Consumption available after trade (B) 217 127 127 Table 1. A Table showing production in Afghanistan and South Korea Coffee (Million d. 1,017 a. Using the information above, draw a PPF (Production Possibilities Frontiers) curve for Afghanistan showing the production and consumption without trade and the production and consumption with trade (point A and B). b. Explain the concept of comparative advantage using your own words then based on the information above, calculate which country has a comparative advantage in coffee production and explain why you think the country has a comparative advantage in coffee production. C. Explain the concept of absolute advantage in your own words. Based on the theory of absolute advantage, which country do you think should specialise in Coffee production and why do you think so? Both theories of comparative advantage and absolute advantage help economists to understand specialization and international trade better. Explain how specialization of production can help these two countries in international trade. e. Recently, the governments of Afghanistan and South Korea decided to improve trade between the two countries by signing a trade agreement. Explain 2 effects this may have on South Korea's economy. f. Economists in Afghanistan are concerned that too many tea products are exported leading to a shortage of tea products in the country. Explain 2 policies that the Afghanistan government can put in place to address this issue.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
C and d part
6. Suppose Afghanistan and South Korea are countries that both produce coffee and tea which are sold for the same price.
Below are various combinations the countries can produce using the same amount of capital and labour.
Afghanistan
South Korea
Coffee
Tea
(Million
(Million
bags)
bags) bags)
117
117
867
Tea
(Million
bags)
Production and consumption before trade 67
(A)
Consumption available after trade (B) 217
127
127
Table 1. A Table showing production in Afghanistan and South Korea
Coffee
(Million
d.
1,017
a. Using the information above, draw a PPF (Production Possibilities Frontiers) curve for Afghanistan showing the production and consumption without trade and the
production and consumption with trade (point A and B).
b. Explain the concept of comparative advantage using your own words then based on the information above, calculate which country has a comparative advantage
in coffee production and explain why you think the country has a comparative advantage in coffee production.
C. Explain the concept of absolute advantage in your own words. Based on the theory of absolute advantage, which country do you think should specialise in Coffee
production and why do you think so?
Both theories of comparative advantage and absolute advantage help economists to understand specialization and international trade better. Explain how
specialization of production can help these two countries in international trade.
e. Recently, the governments of Afghanistan and South Korea decided to improve trade between the two countries by signing a trade agreement. Explain 2 effects
this may have on South Korea's economy.
f. Economists in Afghanistan are concerned that too many tea products are exported leading to a shortage of tea products in the country. Explain 2 policies that the
Afghanistan government can put in place to address this issue.
Transcribed Image Text:6. Suppose Afghanistan and South Korea are countries that both produce coffee and tea which are sold for the same price. Below are various combinations the countries can produce using the same amount of capital and labour. Afghanistan South Korea Coffee Tea (Million (Million bags) bags) bags) 117 117 867 Tea (Million bags) Production and consumption before trade 67 (A) Consumption available after trade (B) 217 127 127 Table 1. A Table showing production in Afghanistan and South Korea Coffee (Million d. 1,017 a. Using the information above, draw a PPF (Production Possibilities Frontiers) curve for Afghanistan showing the production and consumption without trade and the production and consumption with trade (point A and B). b. Explain the concept of comparative advantage using your own words then based on the information above, calculate which country has a comparative advantage in coffee production and explain why you think the country has a comparative advantage in coffee production. C. Explain the concept of absolute advantage in your own words. Based on the theory of absolute advantage, which country do you think should specialise in Coffee production and why do you think so? Both theories of comparative advantage and absolute advantage help economists to understand specialization and international trade better. Explain how specialization of production can help these two countries in international trade. e. Recently, the governments of Afghanistan and South Korea decided to improve trade between the two countries by signing a trade agreement. Explain 2 effects this may have on South Korea's economy. f. Economists in Afghanistan are concerned that too many tea products are exported leading to a shortage of tea products in the country. Explain 2 policies that the Afghanistan government can put in place to address this issue.
Expert Solution
steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Trade
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education