Scenario 20.2 Suppose Labor Productivity Differences Are the Only Determinants of Comparative

question 3

Multiple Choice

Scenario 20.2
Suppose labor productivity differences are the only determinants of comparative advantage, and both Egypt and Ghana produce only corn and cocoa. In Egypt, 10 bushels of corn or 15 pounds of cocoa can be produced in a day. In Ghana, one day of labor can be used to produce either 2 bushels of corn or 8 pounds of cocoa.
-Suppose France can produce 9,000 potatoes or 3,000 lemons per day, and that Italy can produce 3,000 potatoes or 3,000 lemons per day. Which of the following statements in this context is true?

• A)France has an absolute advantage in producing lemons.
• B)Italy has a comparative advantage in producing potatoes.
• C)Italy would be willing to trade one lemon for anything greater than one potato.
• D)Both countries would be willing to trade at a rate of one lemon for one potato.
• E)France has a comparative advantage in producing lemons.

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Definitions:

Learning Curve

A graphical representation showing how an increase in learning translates into improved performance over time.

Learning Curve

A graphical representation that shows how the ability to perform a task, usually measured by time or efficiency, improves over time with practice.

Logarithmic Approach

A mathematical method that uses logarithms to solve problems or model situations, often to simplify multiplicative processes into additive ones.

Labour Bill

An itemized statement or listing of the labor costs associated with a project, often used in construction and services industries.