Question

Country Alphaduck Country Bisonville MPL of duck feathers 20 10

MPL of wood 4 1

Which of the following is true for the table above?

The international relative price of wood is between 5 and 10.

Country Alphaduck has the comparative advantage in duck feathers

The international relative price of wood is between 0.1 and 0.2.

Country Bisonville has the absolute advantage in wood

Answer 1

	Country Alphaduck	Country Bisonville
MPL of duck feathers	20	10
MPL of wood	4	1

Country Alphaduck has an absolute advantage in both duck feathers and wood because it can produce more duck feathers and wood with one unit of labor than Country Bisonville.

Country Alphaduck's opportunity cost of producing wood = 20/4 = 5 duck feathers.

And Country Bisonville's opportunity cost of producing wood = 10/1 = 10 duck feathers.

Because country Alphaduck has a lower opportunity cost for wood ,this implies that Country Alphaduck has a comparative advantage in wood and Country Bisonville has a comparative advantage in duck feathers.

The relative price of wood would lie between 5 duck feathers per wood and 10 duckfeathers per wood.

And the relative price of duck feathers would lie between 1/10 i.e 0.1 wood per duck feather and 1/5 i.e 0.2 wood per duck feather.

Hence, option(A) i.e the international relative price of wood is between 5 and 10 is correct.