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Homework answers / question archive / Consider the case of two countries, Mauritius and South Africa, both producing rum and cloth

Consider the case of two countries, Mauritius and South Africa, both producing rum and cloth

Economics

Consider the case of two countries, Mauritius and South Africa, both producing rum and cloth. If all resources are fully and efficiently employed, one worker in Mauritius can produce 270 units of rum or 30m of cloth per week, while one worker in South Africa can produce 320 units of rum or 40m of cloth per week. Rum Cloth Mauritius 270 30 South Africa 320 40 ased on this information: (4 marks A South Africa has an absolute advantage in the production of rum only. B Mauritius should import rum from South Africa. ? Mauritius has a comparative advantage in the production of cloth. D South Africa should export cloth to Mauritius.

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Absolute advantage comes from greater production with same resource. In this case South Africa is able to produce more quantity of Rum as well as cloth which indicates that South Africa has absolute advantage in the production of both the goods. The opportunity cost of producing one unit of cloth is 270/30 = 9 units of Rum in Mauritius and similarly 320/40 = 8 units in South Africa which indicates that South Africa has comparative advantage in the production of cloth and Mauritius has comparative advantage in the production of Rum. Mauritius will export Rum and South Africa will export cloth

Option D is correct

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