Refer to Table 1-1Now, each country spends all 40 hours of its time producing only the good for which it has a comparative advantage.What is the total output of CHEESE produced by both countries combined now? Assume that Derryland and Whetonia can switch between producing cheese andproducing bread at a constant rate.Table 1-1Labor Hours Needed to Make Number of Units Produced in 401 Unit ofHoursCheeseBreadCheeseBreadDerryland144010Whetonia820

Comparative advantage refers to the ability of a country to produce output at a lower opportunity…

Assume that Derryland and Whetonia can switch between producing cheese and producing bread at a constant rate. Table 1-1 Labor Hours Needed to Make Number of Units Produced in 40 1 Unit of Hours Cheese Bread Cheese Bread Derryland 1 4 40 10 Whetonia 8 20

Assume that Derryland and Whetonia can switch between producing cheese and producing bread at a constant rate. Table 1-1 Labor Hours Needed to Make Number of Units Produced in 40 1 Unit of Hours Cheese Bread Cheese Bread Derryland 1 4 40 10 Whetonia 8 20

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter7: Production, Costs, And Industry Structure

Section: Chapter Questions

Problem 27RQ: What is the difference between economies of scale, constant returns to scale, and diseconomies of...

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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

Refer to Table 1-1

Now, each country spends all 40 hours of its time producing only the good for which it has a comparative advantage.

What is the total output of CHEESE produced by both countries combined now?

Assume that Derryland and Whetonia can switch between producing cheese and
producing bread at a constant rate.
Table 1-1
Labor Hours Needed to Make Number of Units Produced in 40
1 Unit of
Hours
Cheese
Bread
Cheese
Bread
Derryland
1
4
40
10
Whetonia
8
20

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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