ECS3702 Assignment 2 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED Answers, guidelines, workings and references ... Question 1A
Use the hypothetical information in the table below to answer the questions that follow:
Output/hr
Unos
...
ECS3702 Assignment 2 (COMPLETE ANSWERS) Semester 2 2024 - DUE 6 September 2024
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ECS3702
Assignment 2 Semester 2 2024
Unique #:
Due Date: 6 September 2024
Detailed solutions, explanations, workings
and references.
+27 81 278 3372
, QUESTION 1A
(i) Absolute Advantage
Definition: A country has an absolute advantage when it can produce more of a
good with the same amount of resources compared to another country.
• Unos has an absolute advantage in cellphone production because it
produces more cellphones (18 tons/hr) compared to Tres (6 tons/hr).
• Tres has an absolute advantage in candle production because it produces
more candles (8 tons/hr) compared to Unos (6 tons/hr).
Therefore, Unos has an absolute disadvantage in candle production, and Tres has
an absolute disadvantage in cellphone production.
(ii) Trade Possibility and Pattern of Trade According to Absolute Advantage
According to the theory of absolute advantage, trade is possible if countries
specialize in the production of goods where they have an absolute advantage and
trade those goods with each other.
• Unos should specialize in producing cellphones (its product of absolute
advantage) and trade cellphones with Tres.
• Tres should specialize in producing candles (its product of absolute
advantage) and trade candles with Unos.
This specialization allows both nations to benefit from trade by obtaining goods at
a lower opportunity cost.
(iii) Comparative Advantage (Workings)
Definition: A country has a comparative advantage when it can produce a good at
a lower opportunity cost compared to another country.
1. Opportunity Cost for Unos:
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