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Question
Take a look back at the table in Question2, which applies to Northland and Eastshore ten years ago. After technological change has taken place in each nation, the following table now applies in the absence of specialization and trade.
Northland Eastshore Combined
Product Workers Output Workers Output Output
Modems 50 50 50 150 200
DVD drives 50 100 50 75 175
a) Which country now has an absolute advantage in producing modems? DVD drives?
b) Which country now has a comparative advantage in producing modems? DVD drives?
c) Abstracting from any other factors, what is the range for rates of exchange of modems for DVD drives that will now include Northland and Eastshore to trade modems and DVD drives? If trade occurs, which country currently exports modems and imports DVD drives?