Th4.1: Diagrammatic Approach Two

Question 1

Refer to PP

Look at Graph 14. Which country has an absolute advantage in what product?

Answer 1

country 1 has an absolute advantage in good B

country 2 has an absolute advantage in good A

Question 2

Refer to PP

Look at Graph 14. Why is specialisation worthwhile in this case?

Answer 2

since the opportunity cost is different - different gradients

Question 3

Refer to PP

Look at Graph 14. This creates a new green line - the ….. and why?

Answer 3

the new green PPF, since the maximum they can produce is 200 and 1600

Question 4

Refer to PP

Look at Graph 14. If they produce at a rate of 1:1, then…

Answer 4

they produce on the line but they can produce anywhere in the area between all three lines, A

Question 5

Refer to PP

Look at Graph 14. How can we tell that both countries have benefitted from specialisation?

Answer 5

they are both able to produce beyond their PPF