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What country has the absolute advantage in pizzas

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Nation A can produce with one worker per day 10 cakes or 5 pizzas.

Nation B can produce with one worker per day 8 cakes or 2 pizzas.

a. What country has the absolute advantage in pizzas? Explain your answer with numbers.

b. What country has the absolute advantage in cakes? Explain your answer with numbers.

c. Determine the opportunity cost of producing 1 pizza in Nation A.

d. Determine the opportunity cost of producing 1 pizza in Nation B.

e. Determine the opportunity cost of producing 1 cake in Nation A.

f. Determine the opportunity cost of producing 1 cake in Nation B.

g. What country has the comparative advantage in pizzas and, thus, will specialize in pizzas when trading? Explain you answer with numbers.

h. What country has the comparative advantage in cakes and, thus, will specialize in cakes when trading? Explain your answer with numbers.

i. Determine a trade agreement for 1 pizza (price in terms of x number of cakes for 1 pizza) that both countries would benefit from. (Do not give me a range of prices. Just give me one price and one price only.) (Hint: who will be buying and who will be selling pizzas?)

j. Explain (using numbers) how Nation A would benefit from your answer to (i) above.

k. Explain (using numbers) how Nation B would benefit from your answer to (i) above.

Reference no: EM132489472

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