Country A and Country B produce the same two products, backp…
Country A and Country B produce the same two products, backpacks and sweaters. Country A can produce a maximum of 60 backpacks or 40 sweaters, while Country B can produce a maximum of 40 backpacks or 20 sweaters. a) Which country has the absolute advantage in producing backpacks? Explain using numbers. b) What is the opportunity cost to produce a sweater in terms of backpacks in Country A? c) Which country, if either, has a comparative advantage in producing sweaters? Explain. d) Internationally, if 1 sweater is traded for 1.75 backpacks, who will benefit from trading: Country A only, Country B only, both countries, or neither country? Explain. e) Assume there is international trade. Can a country produce beyond its production possibilities curve (PPC)? f) Assume there is international trade. Can a country consume beyond its PPC?