|
7. In order to be able to sell burritos in Country 1, burritos producers in Country 2 have to meet the opportunity cost of a Country 1 burrito. Since Country 1 has a comparative advantage in burrito production, this requires a subsidy.
In Country 2, the opportunity cost of a burrito is 1 computer. In Country 1, the opportunity cost is only 1/3 computers so the difference must be made up by the subsidy, so the subsidy must be equal to 2/3 computers.
|
| Country 1 |
Country 2 |
| Burr. | Comp. | Burr. | Comp. |
| 150 | 0 | 100 | 0 |
| 120 | 10 | 80 | 20 |
| 90 | 20 | 60 | 40 |
| 60 | 30 | 40 | 60 |
| 30 | 40 | 20 | 80 |
| 0 | 50 | 0 | 100 |
|
