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Basic Question 7 of 15
Refer to the table below. A comparative advantage in the production of nickel is held by ______.
B. Botswana
C. neither country
A. Zimbabwe
B. Botswana
C. neither country
User Contributed Comments 15
| User | Comment |
|---|---|
| lna1717 | but Botswana produces 300 vs 0 and Zimbabwe 90 vs 0? |
| cfal1de | lna1717: it's the comparative advantage that matters, not absolute advantage. |
| cbb1 | For comparative advantage, need to look at ratios when both are producing. |
| theBooty | think about slope of the line |
| Done | Divide the production of nickel over gold. You will see the trend. This is about units of production....I think? |
| guna | Add up (0+60+120+180) = Botswana Gold = 360 (300+200+100+0) = Botswana Nickel = 600 opportunity cost = 360/600 =0.6 (0+18+36+54) = Zimbabwe Gold = 108 (90+60+30+0) = Zimbabwe Nickel = 180 opportunity cost = 108/180 =0.6 Same opportunity cost, No Comparative advantage. |
| Shelton | y_1=(-5/3)x_1 + 300, y_2=(-5/3)x_2+90 => same opp cost = 5/3 same opp cost of producing 5/3 units of Nickel per unit of Gold |
| Bibhu | There is another short cut to answer the question. Just get slope of the line i.e. (y2-y1)/(x2-x1) e.g.200-300/60-0=-100/60=-5/3 for Botswana. For Zimbabwe its 60-90/18-0=-5/3. So there is no comparative advantage. If they had asked for comparative advantage of gold y should be replaced by gold values. |
| ljamieson | faster: 300/180 = 5/3 = 90/54 |
| Smiley225 | good question! |
| Yrazzaq88 | I did it this way: 90+60+30 = 180 90/180= .5 300+200+100=600 300/600 = .5 both are the same, as per the highest output that they can produce. |
| chesschh | opportunity cost has to be involved. 0 gold would not apply |
| choas69 | wtf ? 200/60=0.33 60/18=0.33 |
| kseeba17 | Not sure why some people seem to make everything so darn complicated, just use your common sense guys. Zim can produce 90 nickel or 54 silver ... 90/54 = 1.66Nickel per silver Bowstwana can produce 300 nickel or 180 silver ... 300/180 = 1.66 Nickel per silver AKA the same. |
| maryprz14 | 300/180 = 90/54 |
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Learning Outcome Statements
describe the benefits and costs of international trade
CFA® 2024 Level I Curriculum, Volume 1, Module 6.