The countries of Figistan and Blah are small island countries in the South Pacific. Both produce fruit and timber. Each island has a labor force of 1,200. The following table gives production per month for each worker in each country.
a. Which country has an absolute advantage in the production of fruit? Which country has an absolute advantage in the production of timber?
b. Which country has a comparative advantage in the production of fruit? of timber?
c. Sketch the ppf’s for both countries.
d. Assuming no trading between the two, if both countries wanted to have equal numbers of feet of timber and baskets of fruit, how would they allocate workers to the two sectors?
e. Show that specialization and trade can move both countries beyond their ppf’s.
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