Th4.1: Numerical Example Three

Question 1

Refer to PP

Look at Graph 12. What is this another example of?

Answer 1

comparative cost advantage

Question 2

Refer to PP

Look at Graph 12. Who has an absolute advantage in both?

Answer 2

the USA

Question 3

Refer to PP

Look at Graph 12. What should the UK specialise in and why?

Answer 3

cars, since they can produce 50% of the USA output for this but only 1/3 of vans

Question 4

What is the aim of these tables?

Answer 4

to prove that specialisation (C) is better than each country working individually

Question 5

How are the percentages worked out?

Answer 5

through the method of trial and improvement