00:01
For this question, we're given a table that shows the production possibilities for two countries.
00:05
For country a and for country b for products, shirts and pants.
00:17
I want to calculate country a opportunity cost of producing pants and shirts, country b's opportunity cost of producing pants and shirts and calculate who has a comparative advantage in producing each of the goods and want to draw a graph of country a's production possibility frontier and also for country b.
00:38
So for the first question, the opportunity cost of producing one pant in country a is 0 .5 shirts.
00:55
The opportunity cost of producing one shirt in country a is two pants.
01:09
When compared to the potential cost of creating one pair of trousers in country b which generates 1 .5 times as many shirts, the potential cost of producing one pair of pants in country a is equal to half as many shirts.
01:25
So that's telling us that it's more expensive for country b to produce a single pair of pants than it is for country a to produce the same amount of pants.
01:33
So because of this, the manufacturing of pants in country a will enjoy the market position that is more advantageous than country b.
01:44
For the second question, the opportunity cost of producing one pant in country b would be 1 .5 shirts and the opportunity cost of producing one shirt in country b would be three pants.
02:10
So again, the opportunity cost in country b is three pairs of pants for one shirt and whereas the potential cost in country a is two pairs of pants for one shirt.
02:22
So the difference is because of the country b has a higher population and this is telling us that compared to country b's expenses, it's more expensive for country a to create a single pair of shirts.
02:34
So because of this, country b would have a significant edge in the shirt manufacturing business.
02:42
So for the next question, comparative advantage, country a would have a comparative advantage in producing shirts and country b would have a comparative advantage in producing pants.
03:26
So this is because country a is able to produce from table.
03:30
Country a can produce 10 shirts and 20 pants whereas country b, so a can produce 10 shirts 20 pants, right? while b can produce 30 shirts and 45 pairs of pants and 45 pairs of shirts.
03:58
So this is telling us that both countries are able to produce a variety of garments...