Consider the Following Table

question 32

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Consider the following table. I. Which country has an absolute advantage in wheat production?
II. Which country has an absolute advantage in cloth production?
III. Which country has a comparative advantage in wheat production?
IV. Which country has a comparative advantage in cloth production?
V. In what range must the international price of wheat fall?
VI. Which country is likely to gain more from trade if the international price of wheat is 7/5 bushel per yard of cloth?
Answer Key

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Definitions:

Fixed Overhead

Fixed overhead costs are business expenses that remain constant regardless of the level of production or business activity. These can include rent, salaries, and insurance.