(a) Assume a simple world with only two countries, country C and F, and two products, steel and aluminium. The maximum a

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A Assume A Simple World With Only Two Countries Country C And F And Two Products Steel And Aluminium The Maximum A 1 (52.95 KiB) Viewed 32 times

(a) Assume a simple world with only two countries, country C and F, and two products, steel and aluminium. The maximum amount of steel and aluminium that country C and country F can produce if they fully use all the factor of production at their disposal with the best technology available to them is shown as below: Steel Aluminium Country C 1,500 6,000 Country F 1,000 5,000 (i) Explain the absolute and comparative advantages of country C and country F with a diagram. Locate aluminium on the horizontal axis and steel on the vertical axis. (5 marks) (ii) Assume country C's currency depreciates. How this depreciation affects country F's trade balance in short run. How about long run? (5 marks)