Econ 111: Principles of Economics - Accelerated Treatment - Quiz 10
Consider Israel and Egypt and their production of Cotton and Oranges on an acre of land:
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Oranges (in kilos)
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Cotton (in bales)
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Israel
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200
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50
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Egypt
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50
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25
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a) Which country has the absolute advantage in producing which good? Explain.
b) Which country has the comparative advantage in producing which good? Explain.
c) If Egypt has 1 million acres and Israel has 500,000 acres to devote to either production, plot the production possibility frontiers for the two countries.
d) Now, assume that the two nations specialize according to their comparative advantage. What is the new total production of oranges and cotton in this two-country world?