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Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000. (c)  Which country has the absolute advantage in food? In fuel? Explain. (d) Which country has the comparative advantage in food? In fuel? Explain. (e) Which good(s) should each country specialize in?

- November 14, 2022 - Edwin Tunner

 

Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000.

(c)  Which country has the absolute advantage in food? In fuel? Explain.

(d) Which country has the comparative advantage in food? In fuel? Explain.

(e) Which good(s) should each country specialize in?

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