Two regions, Eastland and Westland, use equal quantities of resources to produce either high-performance batteries or wind turbines. Their maximum possible outputs are shown in the table below:
| Region | Battery output (units) | Wind turbine output (units) |
|---|---|---|
| Eastland | 120 | 40 |
| Westland | 60 | 30 |
According to the principle of comparative advantage, which of the following statements is correct?
Westland has a comparative advantage in wind turbines, and mutually beneficial trade can occur at an exchange rate of 1 wind turbine for 2.5 batteries.
Eastland has a comparative advantage in wind turbines, and mutually beneficial trade can occur at an exchange rate of 1 battery for 0.4 wind turbines.
Westland has an absolute advantage in wind turbines, and trade will not benefit either region because Eastland is more efficient at producing both goods.
Eastland has a comparative advantage in batteries, and mutually beneficial trade can occur at an exchange rate of 1 wind turbine for 1.5 batteries.
35 exam-style questions on OCR A Level Economics Specialisation and trade. Each one has a worked solution and a mark scheme showing where the marks go.