Elucidate that specialization and trade can move

Reference no: EM1340290

The countries of Figistan and Blah are small island countries in the South Pacific. Both produce fruit and timber. Each island has a labor force of 1,200. The table below gives production per month per worker in each country:

BASKETS OF FRUIT BOARD FT OF TIMBER

Figistan workers 10 5
Blah workers 30 10

a. Which country has an absolute advantage in the production of fruit? Which country has an absolute advantage in the production of timber?

The country of Blah has the absolute advantage in the production of fruit and timber.

b. Which country has a comparative advantage in the production of fruit? Of timber?

c. Sketch the production of possibility frontiers for both countries.

d. If both countries desired to have equal numbers of feet of timber and baskets of fruit, how would they allocate workers in the two sectors?

e. Show that specialization and trade can move both countries beyond their production possibility frontiers.

Reference no: EM1340290

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