Which nation has a comparative advantage

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Reference no: EM1336166

Comparative/absolute advantages

Techland and Clothworld are two countries with the same number of workers. In Techland each worker can produce 4 units of technology OR 4 units of clothing. Each resident in Techland currently consumes 2 units of technology and 2 units of clothing. In Clothworld each worker can produce 3 units of technology OR 12 units of clothing. Clothworld's residents consume 1 unit of technology and 8 units of clothing. (pretend each country only has one worker each, it makes the math easier.)

1. Does either country have an absolute advantage?

2. Which country has a comparative advantage in technology and by what amount.

3. Which country has a comparative advantage in clothing and by what amount.

4. Is there a basis for trade? If so, what would be an example (using numbers) of trade that would benefit both countries. (Keep each country's consumption of the good they DO have a comparative advantage in the same as before trade occurs, and see if trade lets them consume more of the other good). ASSUME DIRECT TRADE, NO "MIDDLE MAN".

Reference no: EM1336166

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