Siddharth Sharma

Make-Up Assignment

1. Germany has the absolute advantage in both beer and lemonade production
2. For Germany, for every additional 50 beers they manufacture, they have to decrease the
amount of lemonade by 45 (opportunity cost of producing beer). For every additional 45
lemonades produced, the amount of beer must decrease by 50 (opportunity cost of
producing lemonade).
3. For France, for every additional 10 beers produced, they have to decrease the amount of
lemonade manufactured by 25 (opportunity cost of beer). For every additional 25
lemonades manufactured, France must reduce its amount of beer manufactured by 10
(opportunity cost of lemonade)
4. Germany has a comparative advantage for beer production, France has a comparative
advantage for lemonade production.
5. If Germany and France were to specialize and trade with each other, both countries would
be better off. If Germany were to specialize in making beer they would be able to produce
150 gallons of beer, and if France were to specialize in making lemonade, they would be
able to make 75 gallons of lemonade. At these points, each country is maximizing their
ability to make a given product. If the roles were switched, where Germany were making
lemonade and France were making beer, there would be less product (185 total units)
available than if Germany were to make beer and France were to make lemonade (225
total units). Having this greater amount of product allows for a greater degree of trade
and decreases the cost per unit of beer and lemonade, based on the concept of supply and
demand.