Question

Country A can produce, at most, 50 olives or 25 pickles, or some combination of olives and pickles such as the 30 olives and 10 pickles it is currently producing. Country B can produce, at most, 130 olives or 65 pickles, or some combination of olives and pickles such as the 90 olives and 20 pickles it is currently producing.
a. Is there a basis for trade? If so, offer the two countries a deal they can't refuse.

Answer 1

Answer:

There is no basis for trade, as both country has the same opportunity cost. It will not produce benefit from trade

Explanation:

We will check if there is a comparative advantage between country's to know if there is benefit from trade:

Country A

olives opportunity cost:

25/50 = 1/2 = 0.50

Do an olive means renounce to half-unit of pickles

pickes opportunity cost:

50/25 = 2

Do a pickle cost 2 olives for country A

Country B

olives opportunity cost:

65/130 = 1/2 = 0.5

Do an olive means renounce to half-unit of pickles

pickles:

130/65 = 2

each pickle is produce at the expense of 2 olives