Question

The table below shows the quantity of iPods and innovations that can be produced in a year by a worker in the United States and a worker in China.

Task	U.S. Worker	Chinese Worker
Assembly	20,000 iPods per year	5,000 iPods per year
Research and Development	10 innovations per year	1 innovation per year

Use the information and table above to complete and answer the following:

Explain the difference between absolute and comparative advantage.

Will China and the U.S. benefit from trade? Please explain.

Suppose a worker in the United States and a worker in China are each paid the value he/she adds to the firm. If the value added from each iPod assembly is $1.50, and the value added from each research and development innovation is $5,000, calculate the following:

The income a worker in the United States would receive from production of iPods.

The income a worker in China would receive from production of iPods.

The income received by a worker in each country from innovation.

If workers in the United States wanted to maximize income, would they produce iPods or innovations? What would workers in China produce? Does your answer support the choice you made in Part B?

Answer 1

Yes they can gain by focusing on comparative advantage

B 20000(1.50)=30000

C 5000(1 50)=7500

D USA workers earn 10(5000)=50000,Chinese workers=1(5000)=5000

E USA workers will produce innovation because they can earn more by it and Chinese worker would produce I phone as they can earn higher by doing so

Am confused what is part 2.Is it seperate question or 2nd part of this question