gokhale comparative advantage

[jk]

There are two economies A and B and the labor cost of producing unit output of two
Commodities 1 & 2 is
     A    B
1   15  35
2   20  45
 

a)Country A has comparative advantage in producing commodity 1 and B in 2
b) Country A has comparative advantage in producing commodity 2 and B in 1
c) Neither country has any comparative advantage but A has absolute advantage
d)none

[Sumit]

Its c) Neither country has any comparative advantage but A has absolute advantage in both the Commodities.

[jk]

thanx sumit

[jk]

Two countries with given quantities of labour and capital can produce only two
commodities and can trade only with each other. Country A can produce 10 tons of
coal or 10 tons of steel, but country B can produce only 8 tons of coal or 5 tons of
steel.
Assuming constant costs, Country B should:
a) import coal and export steel
b) export coal and import steel
c) export both coal and steel
d) import both coal and steel  

 please ans this..

[madhur1987]

i thin it should be option a bcoz opp cost of producing commodity 1 in country A(.75) is less than the opp cost of producing good 1 in b(.78)

[madhur1987]

for 2nd que i am getting option b

[Sumit]

Hey madhur1987,
we know we can find whether a country has absolute or comparative advantage only in Two cases:
Case-1)we are given with No.of unit of each commodity produce by given countries for given resources (say labor)...
Case-2 we given with price of the commodities in terms of one nation currency(i.e price of foreign good in domestic currecncy with domestic currecncy price in domestic currency or price of domestic good in foreign currecy with price of foreign good in foreign currency)..
Basically the first case is to find absolute or comparative advantage with amt of output produce per unit of given resources and the second case is to find absolute or comparative advantage with money i.e with price of commodities.

I said two cases only coz...Suppose the cost of labor is given but it is not given how many units a labor produce. so, In this case we can't conclude which country has absolute advantage (if any) or has comparative advantage (if any) coz we didn't aware in which country a unit of labor produce more or In other words in which country labor is more efficient...

But in the first question we are given with each country produce a unit of each commodity.so, above condition not implied on it...
So, If we assume Price of the Commodity only depends on labor cost then we can easily infer that price of both the commodity produce by country A is less than price of both the commodities produce by B.
Now, As we have price of both the commodities less in country A...Country A have absolute advantage in both the commodities..

PS: @madhur1987: The concept of opportunity cost which you were applying in this is used to apply in case-1) where we are given with No.of unit of each commodity produce for given resources...and Opportunity cost theory says that the cost of producing one unit of commodity-1 is the amount of commodity-2 a country must need to give up to release just enough resources to produce one more additional unit of commodity-1...

N yes I'm also getting the answer of Q2.B).

[Ayushya Kaul]

How about this one:
12) There are two countries- India and England; two goods- tea and textile; and one input- labour. While textile can be produced by both India and England, tea can only be grown in India. If the labour coefficient in the production of textile is lower for England than for India, what can be said about their comparative advantage?

a) India has comparative advantage in tea
b) India has an absolute advantage in textile
c) England has comparative advantage in textile
d) The comparative advantage cannot be inferred

[Rootz]

Import steel and export coal