Suppose That the Productivity Per Worker in the Crude Oil

question 19

Essay

Suppose that the productivity per worker in the crude oil and natural gas industries of Westland and Eastland are as follows: $$\begin{array} { l c c c } & \underline{ { \text { Output in Thousands of Kilograms } }} \\ & \text { Crude oil } & \text { Natural gas } \\\text { West land } & 4 & \text { or } & 3 \\\text { East land } & 2 & \text { or } & 1\end{array}$$ a) Which country has the absolute advantage in producing crude oil?
b) Which country has the absolute advantage in producing natural gas?
c) Which country has the comparative advantage in producing crude oil?
d) Which country has the comparative advantage in producing natural gas?
e) According to the theory of comparative advantage, will there be trade? If yes, what is the direction of trade?

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Definitions:

Dimensional-analysis

A method used in science and engineering to convert between different units of measurement by using their dimensions.

Ounces

A unit of weight used in the British and U.S. customary measurement systems, equal to 1/16 of a pound.

Quart

A unit of liquid capacity equal to two pints or approximately 0.946 liters.

Dimensional-analysis

A mathematical technique that converts quantities expressed in various units to equivalent quantities in different units using conversion factors.