Question

The table shows labor productivity, i.e., outputs per worker. These numbers report the quantity of output per unit of labor that each country can produce in the two industries, X and Y. Determine which country has
a. Comparative advantage in good X.
b. Comparative advantage in good Y.


Good
Country A
Country B
X
8
6
Y
4
2

Answer 1

Explanation:

The American statesman Benjamin Franklin (1706–1790) once wrote: “No nation was ever ruined by trade.” Many economists would express their attitudes toward international trade in an even more positive manner. The evidence that international trade confers overall benefits on economies is pretty strong. Trade has accompanied economic growth in the United States and around the world. Many of the national economies that have shown the most rapid growth in the last few decades—for example, Japan, South Korea, China, and India—have done so by dramatically orienting their economies toward international trade. There is no modern example of a country that has shut itself off from world trade and yet prospered. To understand the benefits of trade, or why we trade in the first place, we need to understand the con