Use the following information for Problems 13 Suppose Greece

Use the following information for Problems 1-3. Suppose Greece and France only produce two goods: wine and olive oil. The table below summarizes the average hourly worker productivity for both countries Productivity France Greece Olive Oil (liters) 10 per hour 4 per hour Wine (liters) 2 per hour 8 per hour 1. has an absolute advantage in the production of olive oil. has an absolute advantage in the production of wine. a. France; France b. Greece; Greece C. France; Greece d. Greece; France 2. For Greece, the opportunity cost of producing 1 liter of olive oil is France, the opportunity cost of producing 1 liter of olive oil is For a. 8 liters of wine; 2 liters of wine b. 1/8 liter of wine; 1/2 liter of wine c. 2 liters of wine; 1/5 liter of wine d. 8 liters of wine; 10 liters of wine has a comparative advantage in the production of olive oil. has a comparative advantage in the production of wine. a. France; France b. Greece: Greece c. France; Greece d. Greece; France

Solution

1. c. France; Greece

France has an absolute advantage in the production of olive oil. France can produce 10 litres of olive oil in 1 hour while Greece can produce 4 litres of olive oil in one hour.

Greece has an absolute advantage in the production of wine. Greece can produce 8 litres of wine in 1 hour while France can produce only 2 litres of wine in 1 hour.

2. c. 2 litres of wine; 1/5 litres of wine

Greece can produce 1 litre of olive oil in 1/4 hour and in 1/4 hour, Greece can produce 2 litres of wine. France can produce 1 litre of olive oil in 1/10 hour and in that much time, it can produce 1/5 litre of wine

3. c. France; Greece

France can produce more olive oil than wine in one hour. Greece can produce more wine than olive oil in one hour.