Suppose in Finland, a Worker Can Produce Either 32 Cell

question 113

Essay

Suppose in Finland, a worker can produce either 32 cell phones or 4 kayaks while in Canada, a worker can produce either 40 cell phones or 10 kayaks.
a.Which country has an absolute advantage in cell phone production? In kayak production?
b.What is the opportunity cost of 1 cell phone in Finland? In Canada?
c.What is the opportunity cost of 1 kayak in Finland? In Canada?
d.Which country has a comparative advantage in cell phone production? In kayak production?
e.Suppose each country has 1,000 workers.Currently, each country devotes 40 percent of its labor force to cell phone production and 60 percent to kayak production.What is the output of cell phones and kayaks for each country and what is the total output of cell phones and kayaks between the two countries?
f.Suppose each country specializes in the production of the good in which it has a comparative advantage.What is the total output of cell phones and kayaks in the two countries?
g.Provide a numerical example to show how Finland and Canada can both gain from trade.Assume that the terms of trade are established at 6 cell phones for 1 kayak.

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Definitions:

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