Reference- https://www.chegg.

com/homework-help/questions-and-answers/suppose-
technologies-available-given-following-ta-trade-example-explain-crit-q18069354
Question:
Suppose that the technologies available to A and B given by the following table:

A B

S 4 8

T 2 4

Are there any incentives for trade in this example? Explain.

ANS-
Context header: Average Cost
Context explanation: Average cost is the sum total cost to produce output divided by the
number of output or quantity produced. Initially firm start their production average cost
increases at increasing rate but further when firm achieve technological advancement and
managerial skill, firm able to reduce average cost on every unit of output.
Answer and explanation:
A and B are the two technologies available to produce S and T units.So are the different ways
of choices on which firm take decision of production.
Now using the technology of A, firm have option to produce that much of units of S and T, in
which firm has comparative advantage in producing the goods. Solets examine the production
of S and T by technology A. we get
| S units | T units |
|4|2|
| 1 | 0.5 |
|2|1|
Examine the production of S and T by technology B. we get
| S units | T units |
|8|4|
| 1 | 0.5 |
|2|1|
The firm has an incentive if firm has comparative advantage in producing S units of goods
rather T goods, only if the opportunity cost of producing S must be lesser than producing T
goods, then firm would export more of S goods and firm incentives by doing this.