Finance
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Question oneEach nation has 900 units of resources available. To produce one unit of output the following amount of input is required JetsLumberBrazil63India 105Determine the output possibilities for each nationJetsLumberBrazil10050India 6030Graph the PPC for each nation (both nations on single graphs)PPC for Brazil Brazil PPC[pic 1][pic 2] 100[pic 3] 60[pic 4] India PPC[pic 5] 30 50[pic 6] According to theory of absolute advantage, which good(s) should Brazil produce and export? And why (proof).Absolute advantage: if your country uses fewer resources to produce a given unit of output than the other country. Brazil has absolute advantage in both cases since it uses fewer resources to produce a unit of both products as compared to India.
According to theory of relative advantage which good (s) should Brazil produce and export and why (proof)Comparative advantage: if your country can produce the output at a lower marginal cost in terms of other goods foregone than the other countryMarginal costBrazil = 50/100 = 0.5India = 30/60 = 0.5Therefore, both have comparative advantage since they have similar marginal costQuestion twoEach country has 1200 units of resources available. To produce unit of output, the following amount input requirementAutomobileMachine ToolsMexico64Germany 43Determine the output possibilities for each nationAutomobileMachine ToolsMexico12040Germany 171.2573.40Graph the PPC for each nation (both nations on single graphs) Germany PPC[pic 7][pic 8] 171.25[pic 9] 120[pic 10] Mexico PPC[pic 11] 40 73.40[pic 12]According to theory of absolute advantage, which good(s) should Mexico produce and export? And why (proof).Absolute advantage: if your country uses fewer resources to produce a given unit of output than the other country. Mexico does not have any absolute advantage in production of any commodity since it uses many resources in producing both productsAccording to theory of relative advantage which good (s) should Mexico produce and export and why (proof)