Given the input-output relationships in the table below: ...

[lidoalex]

Given the input-output relationships in the table below:
 
  Countries
   A B
   Goods
   X 8 4
   Y 4 1
 
   (a) Which country has absolute advantage in which good and why?
   (b) Which country has comparative advantage in which good and why?
   (c) If A is endowed with 8000 hours of labor, how much X will it produce after trade begins? How much Y? Explain.
   (d) What is the allowable range on A's wages relative to B's if trade is flowing between these two countries according to comparative advantage?

Question 2

Based on Table 9.1, the balance on the current account is
 
  A) +100.
  B) +200.
  C) 0.
  D) -100.
  E) -200.

[bfulkerson77]

Answer to Question 1

(a) B (A) has absolute advantage in both (neither).
(b) A (B) has comparative advantage in X (Y).
(c) 1000 units of X; 0 units of Y (i.e. complete specialization)
(d) A's wage must range between 1/4 and 1/2 B's wage.

Answer to Question 2

B