,ECS3702 Assignment 2 (COMPLETE ANSWERS) Semester
2 2024 - DUE 6 September 2024 ; 100% TRUSTED
Complete, trusted solutions and explanations.
Question 1A Use the hypothetical information in the table below
to answer the questions that follow: Output/hr Unos Tres
Cellphones (ton/hr) 18 6 Candles (ton/hr) 6 8 (i) Identify the
product of absolute advantage and disadvantage for both Unos
and Tres. Explain your answer. [4 marks] (ii) From your answer
in (i) above, explain whether trade is possible and explain the
pattern of trade according to the theory of absolute advantage. [4
marks] 2 (iii) Determine the commodity of each nation’s
comparative advantage and disadvantage. No marks will be
awarded if you do not show your workings. [6 marks] 3 (iv)
From your answer in (iii) above, explain whether trade is
possible and the pattern of trade according to the theory of
comparative advantage. [6 marks] [20]
Question 1A: Analysis of Absolute and Comparative
Advantage
(i) Identify the product of absolute advantage and
disadvantage for both Unos and Tres. Explain your answer.
[4 marks]
Absolute Advantage occurs when a country can produce
more of a good with the same amount of resources than
another country.
o Unos: Can produce 18 tons of cellphones per hour
and 6 tons of candles per hour.
, o Tres: Can produce 6 tons of cellphones per hour and
8 tons of candles per hour.
Absolute Advantage in Cellphones: Unos produces 18
tons of cellphones per hour, whereas Tres produces only 6
tons. Therefore, Unos has an absolute advantage in
producing cellphones.
Absolute Advantage in Candles: Tres produces 8 tons of
candles per hour, whereas Unos produces only 6 tons.
Therefore, Tres has an absolute advantage in producing
candles.
Summary:
o Unos has an absolute advantage in cellphones.
o Tres has an absolute advantage in candles.
(ii) From your answer in (i) above, explain whether trade is
possible and explain the pattern of trade according to the
theory of absolute advantage. [4 marks]
Trade according to Absolute Advantage: Trade is
possible when countries specialize in producing goods for
which they have an absolute advantage. Each country
should specialize in producing the good that it produces
more efficiently (in absolute terms) and trade with the other
country for the good in which it has a disadvantage.
Pattern of Trade:
o Unos should specialize in the production of
cellphones (where it has an absolute advantage) and
trade them for candles.
o Tres should specialize in the production of candles
(where it has an absolute advantage) and trade them
for cellphones.
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