Tuesday, September 7, 2010

Answer to Free Response Question - Comparative Advantage

Ai) The opportunity cost is 1/5 unit of food.
Aii) The opportunity cost is 10 units of cloth.
Bi) Beeland has a CA in cloth.
Bii) Newland has a CA in food.
C) It doesn't matter the ratios are the same even if it quadruples. No difference.


Part C is designed to eat up time if you are not thinking clearly and could be the difference between a 4 and a 5. Sneaky jerks!

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