Solution-Australia opportunity cost of making a computer

Australia opportunity cost of making a computer

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Reference no: EM133083595

In Australia one unit of labor can produce 25 computers or 25 bushels of wheat. In Taiwan one unit of labor can make 30 computers or 50 bushels of wheat. Assume that computers and wheat are the only two goods in the world. (What is the purpose of this assumption?)

a. What is Australia's opportunity cost of making a computer? What is Taiwan's opportunity cost of making a computer?

b. What is Australia's opportunity cost of producing a bushel of wheat? What is Taiwan's opportunity cost of producing a bushel of wheat?

c. Does Australia have absolute advantage in producing anything? Explain.

d. Does Australia have comparative advantage in producing anything? Explain.

e. Does Taiwan have comparative advantage in producing anything? Explain.

f. Is it possible for Australia to gain by trading with Taiwan? Explain.

g. Is it possible for Taiwan to gain by trading with Australia? Explain.

h. What are the limiting terms of trade, outside of which exchange between Australia and Taiwan will not occur? (These will be barter ratios, e.g. 2 computers/bushel of wheat.)

Reference no: EM133083595

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Australia opportunity cost of making a computer

Reference no: EM133083595

Reference no: EM133083595

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