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Use the information in the table on labor productivities in France and Germany to answer the following
question
Output per Hour Worked
France: cheese is 1 kilogram, cars is 0.25 car
Germany: cheese is 2 kilograms, cars is 2 cars
a. Which country has an absolute advantage in cheese? In cars?
b. What is the relative price of cheese in France if it does not trade? In Germany, if it does not trade?
c. What is opportunity cost of cheese in France? In Germany?
d. Which country has a comparative advantage in cheese? In cars? Show how you know.
e. What are the upper and lower bounds for the trade price of cheese?
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