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JAMB Economics 1984 Question 40

Question 40

International Trade

Questions 39 and 40 are based on the table below:
The international production set for Nigeria and Austria is:
Products | Nigeria | Austria
Cocoa | 20 tonnes | 12 tonnes
Lace | 10 metres | 8 metres
From the table, it can be deduced that

  1. A.Nigeria should produce cocoa and lace
  2. B.Austria should produce cocoa and lace
  3. C.Nigeria can benefit from producing lace only
  4. D.Nigeria should not produce any of the products because of her relative disadvantages
  5. E.Austria should produce lace and Nigeria should produce cocoa.
Show the answer and explanation

Answer: E (Austria should produce lace and Nigeria should produce cocoa.)

Explanation

A metre of lace costs Austria 1.5 tonnes of cocoa but Nigeria 2 tonnes, so Austria has the comparative advantage in lace and Nigeria in cocoa.