Cloth WidgetsHome1020Foreign6030Page <25. Given the information of the units of labor required to produce one unit of each good (notMPL) in the table aboveA. Home has a comparative advantage in cloth.B. neither country has a comparative advantage in cloth.C. Foreign has an absolute advantage in both cloth and widgets.D. Foreign has a comparative advantage in cloth.6. From the four prices below, what could be the relative price of cloth to widget if tradehappens?A. 1/6B. 1/3C. 1/3D. 5/27. Suppose that the relative price of cloth to widgets is 1. What is the ratio of real wage inHome to Foreign when trade happens?A. I1) 108. According to the Ricardian model, the consumption possibility frontierhp

Comparative advantage describes the idea of comparing how much it costs in terms of what could have…

A. Home has a comparative advantage in cloth. B. neither country has a comparative advantage in cloth. C. Foreign has an absolute advantage in both cloth and widgets. D. Foreign has a comparative advantage in cloth.

A. Home has a comparative advantage in cloth. B. neither country has a comparative advantage in cloth. C. Foreign has an absolute advantage in both cloth and widgets. D. Foreign has a comparative advantage in cloth.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Cloth Widgets
Home
10
20
Foreign
60
30
Page <
2
5. Given the information of the units of labor required to produce one unit of each good (not
MPL) in the table above
A. Home has a comparative advantage in cloth.
B. neither country has a comparative advantage in cloth.
C. Foreign has an absolute advantage in both cloth and widgets.
D. Foreign has a comparative advantage in cloth.
6. From the four prices below, what could be the relative price of cloth to widget if trade
happens?
A. 1/6
B. 1/3
C. 1/3
D. 5/2
7. Suppose that the relative price of cloth to widgets is 1. What is the ratio of real wage in
Home to Foreign when trade happens?
A. I
1) 10
8. According to the Ricardian model, the consumption possibility frontier
hp

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