In Narnia, One Binky Can Be Produced with Two Workers

question 114

Essay

In Narnia, one binky can be produced with two workers and one sippy cup can be produced with 0.25 workers. In Bedrock, one binky can be produced with one worker and one sippy cup can be produced with 0.50 workers.
a. What is the opportunity cost of producing one sippy cup in Narnia and in Bedrock?
b. Which country has the comparative advantage in sippy cups?
c. Suppose that each country has 100 workers and completely specializes in its comparative advantage. How many units of output of sippy cups and binkys will each country produce?
d. Before trade, Narnia produces 25 binkys and 200 sippy cups, and Bedrock produces 50 binkys and 100 sippy cups. Show how specialization and free trade can make each country better off than it was before the trade situation.

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Definitions:

Welfare

Welfare refers to government programs designed to support the well-being of its citizens, especially those in financial need.

Poverty Line

A defined level of income that is considered the minimum necessary to maintain a standard of living.

Losing Ground

A phrase indicating that a person, organization, or entity is falling behind in competition or losing advantage.

Antipoverty Spending

Antipoverty spending refers to government expenditures aimed at reducing poverty through direct aid, such as welfare programs and income support.